Preamble

The House met at Eleven o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

QUESTION OF PRIVILEGE

Mr. Speaker: Yesterday, the hon. Member for Bolsover (Mr. Skinner) made a complaint on grounds of privilege about a Press release by Aims for Freedom and Enterprise concerning Mr. Attorney-General. I have given careful consideration to that complaint, but I have come to the firm conclusion that it does not raise such issues as would justify me in allowing precedence over the Orders of the Day to a motion concerning it. The hon. Member suggested also that the Press release might constitute a contempt of court. That is not of course a matter for me and I can make no comment.

Mr. Skinner: As I said yesterday, there were two considerations which led me to raise this matter. One was the mere possibility of a breach of privilege, and I had to take the course I took to clear that matter. I took the other course—ensuring that this was sent to the courts—so that people could deal with it there.

Mr. Speaker: I am obliged. Of course, if the hon. Member wishes to send it to the court—

Mr. Skinner: It has gone.

Mr. Speaker: I am obliged: the hon. Gentleman anticipates me time and again.

NATIONAL ENTERPRISE BOARD GUIDELINES

11.6 a.m.

Mr. Bruce George: I beg to move,
That this House takes note of the National Enterprise Board Guidelines which were laid before the House on 22nd and 23rd December 1976.
I chose this important subject because, with such limited time available to the House because of the demands of devolution, I felt it important that we should have the opportunity to debate something of fundamental importance. To win the Ballot for Private Members' motions the week after I secured an Adjournment debate and two weeks before I introduced a Ten-Minute Bill forces me to the conclusion that I shall have to revise my view that the law of averages is suspended in my case, because I had been balloting for two-and a-half years without success. I am pleased also that because I am speaking first I am not subject to the same control by Mr. Speaker as he has exercised over me for the last two-and-a-half years in cutting me short after 15 minutes or even less.
As a fervent supporter of the principle of public ownership, I have never been a believer that the Morrisonian principle was sacrosanct. As someone said 2000 years ago, there are many ways of labouring in the vineyards of the Lord, and I believe that there are many models that one can examine in seeking ways to extend public ownership and public and social control and of involving the public in a way short of total control.
The concept of the National Enterprise Board has a long and honourable past and I believe will point to ways in which society and the public can acquire a greater voice in the decision-making process in industry. The NEB, as one of the major elements in the Government's strategy for industrial development, will have before it a very wide range of tasks—financial, economic, social and—dare I say it?—political. Regrettably, it possesses limited resources to achieve these goals. It goes without saying that if it is to be truly effective, it is important that the scarce resources available to it are spent in order to give a maximum return to society.
We shall undoubtedly hear criticisms from Conservative Members of the principle of the NEB and there will be justifiable criticisms from this side, with one of which I have every sympathy, that the NEB as it was originally conceived has been considerably watered down—some would say, emasculated. In the words of Stuart Holland, one of the authors in a way of the existing NEB, there has been something of "a sell-out".
The 1969 document "Labour's Economic Strategy", which first brought up the idea of a State holding company, through to Labour's Green Paper "The National Enterprise Board" and the Government's White Paper "The Regeneration of British Industry", this is how many of us conceived the NEB and it is with some reluctance that I say that the original concept has been, if not obliterated, considerably amended.
As someone who very warmly welcomed the National Enterprise Board from the outset, bearing in mind its prospective rôle and powers, it is particularly galling to me to see the commentaries of some journalists on the way the Board's rôle has changed. One journalist—Keith Richardson—said this:
it is a million miles from the all-conquering machine that the Labour Party originally envisaged in 1973. … From the spectre that has so terrified private industry ever since. The lion's teeth have been well and truly drawn.
It is that that causes me some concern.
I hope that that view will turn out to be a wrong one. I welcome the change of heart that some of the original opponents of the National Enterprise Board have had. Yet, if the price of this support is a complete change of orientation, perhaps the price will have proved too high to pay.
One journal—Commerce International—wrote:
It seems a very short time ago that the NEB was a mere chimera lurking in the pages of an already controversial Industry Act—an unknown quantity which to many implied back door nationalisation. But while the business community has been anxiously watching for the danger signs the creature has busily been finding itself an acceptable, even accepted, place in society.
I am not certain how to view statements of this kind from Commerce International and Keith Richardson. Perhaps we should see them as an indict- 
ment, perhaps as a way in which the organisation has evolved due to pressures. I fully realise the pressures that the Department of Industry and the Government have been under. This epitomises the dilemma that Lord Ryder is facing. On the one hand, he must satisfy the very legitimate aspirations and demands of the trade unions and the Labour Party to extend the activities of the NEB into highly profitable areas and playing a major rôle in boosting employment and investment, if necessary on commercial terms.
Lord Ryder must also—we know that we are living in a mixed economy—secure the co-operation of the private sector. It is very important for the impetus of the NEB that Lord Ryder does not seek too often to placate private forces; because obviously, if he takes the line that he must not anger the business or financial world, the aim of the Board will have been destroyed and the whole purpose of establishing a National Enterprise Board to bring about a restructuring of industry—the private and the public sectors—will have been dissipated.
Lord Ryder is obviously walking a tightrope in seeking to meet these conflicting interests, but one trusts that, as a highly successful business man and a politician of some note, he is able to steer some line between the conflicting interests and bring about the much needed change in our industrial structure.
It never ceases to amaze me that so much opposition should have been generated by the concept of a State holding corporation—the National Enterprise Board. I regret that the Conservative Party appears to be committed, if it has the opportunity, to repeating the disastrous mistake it made with the IRC. I believe that the NEB, regardless of which party is in office, must play a vital rôle and I hope that the longevity of the Board will be assured.
The establishment of this type of parastatal organisation to restructure declining industry is neither novel nor the prerogative of Socialist Governments. There has been a procession of Governments, most of them in non-Socialist—indeed, Conservative—societies that have had recourse to a State holding corporation, either of the IRI model or of our earlier IRC


model. West Germany, Canada, France, Italy, Sweden, Austria, Australia—indeed, I am assured that even Japan—have felt, even in free enterprise societies, the need for such an organisation.
It is ironic that we are appearing to follow in some ways the Swedish Statsföretag and looking to Sweden for some guidance when in fact that organisation itself received much of its impetus and rationale from our IRC, which regrettably bit the dust some years ago.
I give a general welcome to the Guidelines which have been set. However, in parts they are far too tight for the NEB. In parts, they are too loose. Indeed, parts are obviously vague—perhaps deliberately so.
The final version of the Guidelines differs slightly from the Draft Guidelines published a year earlier. I am pleased that the Government have had second thoughts about what is now Section 9:
The NEB may make loans, provide guarantees, engage in joint ventures or make any other form of financial commitment.
The NEB now has much more room for manoeuvre. For sums up to £10 million, it need give no advance notice. For sums from £10 million to £25 million it must give advance notice of its intentions. After £25 million, obviously it must seek approval. I believe that the original Draft Guidelines would have enforced far too many constraints on the Board and this liberalisation—if I dare use the word—is to be welcomed.
There appears to be another change. I am not certain whether it is a mild change or whether it portends something rather more dramatic. This relates to the section dealing with industrial democracy, Section 29, I would certainly welcome the Minister's view—indeed, his reassurance—that the principle of industrial democracy as laid down in "The Regeneration of British Industry" and in the Draft Guidelines will not in any way be watered down.
Section 32 of the Draft Guidelines, published in 1976, says this on the subject of industrial democracy:
The Industry Act 1975 states that one of the functions of the NEB is the promotion of industrial democracy in undertakings it controls. The NEB shall take, to the satisfaction of the Government, adequate steps to see that in accordance with the Government's policies

for industry generally, management in these undertakings is playing its part in providing for the full involvement of employees in decision making at all levels. The NEB will have freedom to conduct experiments in the light of its own need and experience and the views of the workers concerned.
Yet in the Mark II version there appears to be something of a change, for it says:
…The NEB shall make appropriate arrangements with their subsidiaries to the satisfaction of the Government, to ensure that management in these undertakings is playing its part in furthering Government policies in this field.
There have been some interpretations of this change of wording—in some way analogous to the art of terminology, some observers looking at what might be an innocuous change and then inferring that all sorts of things may or may not be true. Maurice Corina in The Times has said that the NEB
has been quietly relieved of an obligation to provide for the full involvement of employees in decision making at all levels".
I greatly hope—this answer may be given, and it is a charitable assessment—that the Department of Industry in no way wants to burden the NEB with certain set principles prior to the publication of the Bullock Report which we expect very soon and which perhaps the Minster has already seen.
It is rather frustrating for us on this side, who believe fervently in the principle of an extension of democracy in industry, to read, as we have read in The Times—
Commitment dropped for NEB worker directors.
I hope that this will turn out to be a wrong assessment and that my hon. Friend will be able to comment on this.
The Guidelines contain some further mild changes in Section 5, but I think that most of the changes are mere drafting changes transforming the Draft Guidelines into something legally very different.
These Guidelines have received some, though not a great deal of support. They have received a great deal of criticism, most of it trivial. I refer my hon. Friend to a private publication by Maxwell Stamp Associates. Two years ago, it brought out an occasional paper called
Long-Term Economic Benefits from Industrial Investment.
After the Draft Guidelines had been formulated. the organisation brought out


an additional paper which I believe offers some criticisms in a spirit of helpfulness, and not of malice on the lines that the Board should simply be thrown out as superfluous and damaging. On the contrary, the additional paper suggests that the Board may have great potentiality but that the Guidelines inhibit the great contribution that it could make. It says:
The Draft Guidelines do not set out the positive criteria by which the NEB is to determine how to perform its function of promoting industrial development.
It is rather critical in saying that the main purpose of the Draft Guidelines
appears to be to assure private industry that the NEB will not be allowed to act on its own in a dynamic and aggressive way.
It make more fundamental criticisms of the Draft Guidelines by saying:
The Guidelines are a depressing document. They do not cover the fundamental issues of economic development policy. They paint the confusing picture of an organisation required to operate exactly as if it were in the private sector (and may therefore just as well not exist as a public board), with no access to planning agreements; but subject to stringent ministerial restriction regarding its right to buy into existing companies, and bearing the obligation of employment creation, regardless of its other obligation to earn an 'adequate' return on its capital.
Since then, some of these criticisms have been met. But the paper warned:
Even if the NEB is able to find its way through that mass of contradictions it is difficult to see how it can interpret the Guidelines as encouraging it to play a developmental role.
If the NEB is needed at all, it should be required to meet economic, not just financial, criteria. It should also be free from undue Government interference or control. The Guidelines fail on both counts.
As a result
—and this aspect is worrying to me and some of my hon. Friends—
the NEB is likely to go down in history as a failed opportunity to create an institution that might have helped to arrest British industrial decline.
I hope that that analysis proves to be wrong. I believe that there may be opportunities within the existing Guidelines to develop. The Board is still in its early stages. I hope that some of these criticisms will be met.
It is a prerequisite for the success of the Board that it does not become the repository for the failures of British industry, the industrial equivalent of a knacker's

yard. It has flexibility in the matters within the parameters set by the Government. Lord Ryder is not some form of lone ranger, wandering around with no control by Government or Parliament. There is some control, but not a great deal. I believe that he has a great deal of flexibility of action. I hope that the Board will not be bedevilled, as many chairmen in other public corporations have been, by continual political pressures. If that happens, the purpose of the Board and the dynamism that could be created through it will be lost.
The Guidelines say that the Board should be free to act as any commercial company and to act on its own initiative. The control of this House is obviously circumscribed. If the Board turns out to be incompetent, it should be booted out, but I believe that the personnel of the Board having been selected and its Guidelines set out, the Board should be allowed to show its mettle. If, after a certain period, it does not meet our requirements, changes will have to be made, but I would not like to see Ministers permanently on Lord Ryder's back imposing on the Board political decisions. Obviously, some will have to be made, but I believe that Lord Ryder must have flexibility of action in order to achieve the goals he has been set.
The Board's portfolio, which I hope will be ever-enlarging, must contain profitable—indeed, highly profitable—companies. I deplore the suggestion in some quarters that once the Board puts a company on its feet again and that company is making adequate profits, it should be handed back to private enterprise. I both deplore and abhor that suggestion. I trust that it will never happen.
I am not entirely happy with the criteria for investment in the Guidelines. My hon. Friend should read the paper issued by Maxwell Stamp Associates entitled
Long-Term Economic Benefits from Industrial Investment—A Suggested Approach for the NEB.
It makes a number of suggestions and criteria for investment, which, of course, the Board may indeed be following now or which it would be wise to consider.
I am glad that the Government have not succumbed to pressures from the CBI and other sources that the Board should be permitted to buy shares in a company


only with the approval of that company's directors. I quote an impeccable source in support of my view. The Economist on 6th March last year said:
The Government is rightly saying that the NEB should be free to act like any other commercial company, and rightly rejecting the CBI's notion that it should only be permitted to poke its nose into the private sector where existing management would welcome it—i.e., into lame ducks' nests.
The Board must be dynamic, it must be aggressive. If it takes a timid approach, it will in no way solve the deepseated problems affecting industry and society in this country.
It will not surprise me if there is fundamental criticism from the Conservative Party and considerable disappointment among supporters of the Government. But if there have been failures, they must not all be placed on the shoulders of the Board. The funds which have been and will be allocated to the Board for its manifold tasks are totally inadequate. I do not believe that even the extra £50 million announced by my right hon. Friend the Chancellor of the Exchequer for the Board will compensate for the earlier and savage Treasury cuts. The aspiration must be at some stage—in the near future, I hope, if it is feasible—to restore the budget of the Board to the annual £1,000 million recommended by the TUC and the Labour Party in its programme.
The IRC was bedevilled by the fact that the amount of money available to it was far too limited. As my hon. Friend the Member for Birmingham, Northfield (Mr. Carter) said, the IRC should have been created 30 years earlier and should have made a real impact. It could certainly have made a greater impact when it was finally established if more money had been available to it. I hone that we do not scupper the National Enterprise Board's aims and operations by making available to it what could be classed as a derisory sum which would allow it only to tinker and to make a marginal impact on the structure of industry.
Looking at the Guidelines and statements by Ministers, there are hopes that, within the Board's existing framework, there lies the opportunity of more money being available when the occasion arises. I hope that it will arise. Nor was it

the fault of the Board that it was born in circumstances which were unfavourable and hardly propitious for the expansion of dynamic enterprise. It was born at a time of recession which was described by one person as the "lame duck breeding season". Even before its birth, it was presented with a group of companies which could hardly be put into the vanguard of the profit-making sector. I believe that it was right for the Board to acquire those companies. Coming from the West Midlands, I thank God that they were rescued and came within the scope of the Board.
But it hampered the Board initially to be pre-occupied with the problems of British Leyland. I hope that I am wrong, but I feel that this may have had a dampening effect on the prospective dynamism of the NEB. It it unfair to be too critical of the Board when its initial rôle was complicated by early acquisitions.
It would also be unfair to criticise the Board when it has been in operation for such a short time. It was set up only a year ago, and when one contrasts it with the IRC, which took a long time to get off the ground, we can see that its shortcomings are not as great as some people imagine.
The Board has already acquired in its portfolio holdings representing 750,000 jobs and a turnover of more than £3,000 million. It has acquired a significant portfolio in a fairly short period, and I hope that it will be increased considerably.
We must also ponder what would have happened if the Board had not taken certain companies into its possession. It now has the only major British car producer, the major British motor cycle producer, the only aero-engine producer of any significance and the major machine tool company. I wonder what would have happened to British industry if these companies had been allowed to collapse.
It was necessary for the Board to put British Leyland and its subsidiaries in order before embarking on a more expansionist rôle. Sir Frederick Catherwood has suggested that Britain should follow the Scandinavian model of doing a number of things really well rather than taking on too much and being


mediocre. It depends what one means by doing a number of things well, but it would have been disastrous if the Board with its staff of 50—which I hope will be considerably increased—had digested too much initially. The consequences could have been unfortunate. The Board must not be associated with failure, though I am not one of those who believe that it should be devoid of social consideration.
As the hon. Member for Walsall, South, I regard today as something of a black day. Fifty workers at James Bass and Sons, an important furniture manufacturer in my constituency, are going to work today for the last time. I hope that the Minister will look at the circumstances surrounding the demise of this company, which had a full order book and was operating very profitably until the larger company with which it is associated and the bank decided that the receiver should be sent in. James Bass and Sons has now gone into liquidation with regrettable consequences for the locality.
It is impertinent for some people to say that the Board should not have a social rôle. It should have this rôle, although I am not suggesting that James Bass is a contender for being taken over by the Board. It is too late for that.
However, if the Board is properly compensated it must consider taking into its possession companies which may not be among the high flyers. There may be circumstances in areas of high unemployment when such companies should be brought within the ambit of the Board, which clearly has an obligation to assist in creating employment in areas of high unemployment. The Board may have to preserve jobs for the sake of preserving them. Those who believe that it should be concerned only with financial criteria are unfair. If it is properly compensated, it must consider taking over some smaller companies.
We should not scoff at the regional rôle of the Board. The IRI made an enormous impact in developing the southern part of Italy. No part of the United Kingdom is as underdeveloped as southern Italy, but the success of the IRI could be repeated here and the Board could play a significant rôle with other Government agencies in developing a regional strategy. I look forward to that.
The Board has an enormous rôle to play in developing medium-sized companies. The Board has made such an impact in Coventry that it is sometimes said in jest that the city council should co-opt a member of the Board. At a speech in Coventry six months ago, Lord Ryder referred to the great rôle which the Board could play in helping medium-sized companies. He said:
there remains a considerable unfulfilled need for equity capital in important sectors of industry, which the major investing institutions—the insurance companies, pension funds, etc.—are not really equipped to deal with. It was precisely to meet this need that the NEB was set up.
Of course, the Board is not a philanthropic institution. It demands a great deal in return for its involvement although those demands regrettably often stop short of putting someone on the Board. Companies with which the Board is involved have far more operational freedom than those taken over by private concerns. The people who deprecate the involvement of the Board in buying shares in companies adopt different criteria and values when considering small and medium-sized companies which are gobbled up by larger private concerns.
Many companies who do not have access to the Stock Exchange and who wish to make qualitative changes in their business can profitably look to the Board. These are early days, and the Board is feeling its way, but its image would be considerably improved if it acquired stakes, as it has recently, in smaller companies which show great potential. The Board must change its image and become involved with profitable concerns.
As a West Midlands Member, I know as well as anyone the role of the Government and the Board in retaining manufacturing industry in the region. The consequences of allowing British Leyland, Chrysler, Alfred Herbert and the Meriden co-operative to collapse would have been catastrophic, not only for those directly employed in the firms but for the tens of thousands, including many of my constituents, employed in subsidiaries. It would have been catastrophic for the region and for the country as a whole.
The Board must not be confined to the negative role of saving and resuscitating ailing concerns. I hope that I do not sound greedy when I say that I trust that


we have not exhausted the supply of the Board's funds for the West Midlands. The Board can play a significant role in developing the structure of industry in the area. The deep-seated structural defects of the West Midlands economy have been pointed out on many occasions in authoritative documents from local authorities and others and they will not be resolved by short-term palliatives or minor tinkering.
As I pointed out in a recent Adjournment debate, the region must regain its primacy, and this will be done only by collaboration between the public and private sectors. The Board has an important rôle to play here.
I hope, too, that the NEB will not confine its activities to these shores alone. Until now, its endeavours abroad have fallen somewhat short of the ideal. I hope that its experiences in Dubai and Venezuela have not given it a bloodied nose and will not discourage it from entering further into this field. In neither of these two failures was the NEB to blame. I hope that a lesson will be learned from these abortive attempts to work with consortia to sell British products abroad. If the NEB gets further involved with consortia, it will only be doing what countries like France and Japan are doing much more successfully.
There are many developing countries which seek the involvement of an NEB-type body in a consortium before granting a large contract. If the seal of approval of a body like the NEB can be given to a consortium, it enhances the prospects of that consortium being successful. It will show that the private sector and the public sector can work in harmony to achieve public good. There is a great deal to be gained. If we are to muscle in on the great profit which legitimately can be made abroad and if we are to have an export-led recovery, we must get a fair share of the jumbo contracts which are available abroad. One authority estimates that Britain has lost £2,000 million of contracts in a couple of years because of its inability to put forward a lead contractor like the NEB. I hope that we shall see far more success on this front.
I want to refer briefly to planning agreements, because these are bound up inex- 
Tricably with the Government's strategy to regenerate British industry. It is a matter of profound regret to many that as yet no planning agreements have been secured. It is only a minor consolation to hear that there are a couple of planning agreements "fairly near completion". It is some consolation to know that a number of companies in the public sector are involved with the Government in some planning agreements and that a number of companies like Clarke Chapman and Babcock and Wilcox, whose position is somewhat delicate at the moment, have considered it expedient to negotiate with the Government about planning agreements. But where are the larger enterprises which are vital for the planning agreement system to operate?
Expressing his disappointment about the lack of planning agreements, the Secretary of State said that the Government would have to take stock of the situation and would have to lay proposals before the House to improve it. That is a timely intervention, and I hope that the objections of organisations like the CBI, which have been expressed quite eloquently and in some detail, will be over-ridden and that they will recognise the virtues of planning agreements. We look forward to seeing far more progress than we have had until now.
I should like the Minister's advice about an interesting article which I read in The Times on 2nd December 1976, because it may be of considerable importance in looking at the future operations of the NEB. The article refers to a takeover battle between Dunford and Elliott, the Sheffield steel group, and Johnson and Firth Brown. It goes on to say:
On October 27, following Bank of England pressure, J &amp; FB representatives met a representative of the Prudential to discuss J &amp; FB joining a consortium to raise additional capital for Dunford.
I should like to know why, if it is true, the Bank of England exerted this pressure when the NEB itself was willing to provide capital. Does it mean that the NEB has to seek approval from the Bank of England before proceeding, or is it likely to be in competition with the Bank of England when it starts to put out any form of feeler for negotiations with a company to provide capital? This can be viewed in an ambivalent way as regards the Bank of England. On the other


hand, it may be that the Minister will say that it is no part of the rationale of the NEB to provide some form of catalyst to promote mergers.
I should like the Minister to look at an article in a Sheffield newspaper about the package deal designed to rescue Dun-ford and Elliott. It says:
It would give the group a breathing space, keep it roughly in its present shape and block any move into private sector steel by the National Enterprise Board. The NEB already has a small but significant shareholding in Dunford.
What the report is hinting at is that in this deal the Bank of England played a major rôle, thereby thwarting the NEB. If that is likely to be repeated in the future, this House should look at it closely.
I hope that the NEB will be able to do far more in the rationalising and restructuring of industry—the old IRC rôle. It has made tentative steps in this direction. I hope that in the near future it will expand. I hope, too, that companies in the machine tool industry, for example, will be more prepared to take advantage of the facilities offered. An area like mine has a number of small machine tool companies. I am disappointed that the money available to them has not been taken up. I hope that that disappointing response will be reversed.
I should like to know what strategy the NEB is about to adopt in the future, assuming that it has got down to considering it. I wonder what kind of portfolio it sees itself having. The article to which I referred earlier has considerable advice on this score.
The staff of the NEB is very small. I was amazed to learn that it comprises only 50 people. It may be that Lord Ryder wants to show industry that the NEB is not overmanned. But, with the rôle which I enevisaged for the NEB—it may be different from that which Lord Ryder envisages—a staff of 50 is rather small. I would never suggest appointing bodies simply for the sake of it. But I think that a dynamic body like the NEB should be staffed by more than 50 people. With the vast experience built up abroad by other NEB-type enterprises. I wonder whether people could not be appointed to the NEB who have direct experience in these foreign examples. This might be worth considering.
I believe that the NEB is to be a major source of initiative and control in manufacturing industry. It is important that it provides jobs and new investment, that it boosts exports, that it provides for import substitutions and that it helps us to withstand the foreign multinational company. It has very many rôles. "Labour Programme 1976" lays down as one of our national objectives the need to achieve double the 1970 rate of manufacturing investment by the mid-1980s. We hope that the NEB will play a major rôle ill bringing this about. But this rôle of the NEB must not be timid. It must be dramatic and dynamic. It is this lead for which we are looking.
The final words, perhaps, should be Lord Ryder's. He said:
It is surely obvious to all of us that we cannot hope to make progress in strengthening our industry and our economy without a joint effort on the part of all those who have a contribution to make—the Government, management and workers. The NEB has, I think, a great potential for assisting in the building up of a new and fruitful partnership of this kind. …I am sure that the NEB can help; I only ask that it should be given as much opportunity as possible to do so.
The job is Lord Ryder's. From this House and from the Department of Industry, we have given him a great deal of flexibility. Many hopes ride on the NEB. I hope that, when we come to look at its successes, perhaps a year from now, we shall see a significant improvement in manufacturing industry. That will be of satisfaction not just to Members of this House but to the country at large.

11.50 a.m.

Mr. Anthony Nelson (): I begin by congratulating the hon. Member for Walsall, South (Mr. George), first on being lucky enough for his motion to be chosen as first on the list of motions today, and, secondly, for the measured and positive way in which he has initiated this important debate. Many of us will have noted and been impressed by—some hon. Members will no doubt have been genuinely moved by—his faith in the NEB. Whatever its failings, I am sure that his contribution to our discussion this morning will have been noted by those executives who are responsible for implementing policy under the Industry Act 1975, and his recommendations will perhaps be put into effect by some of those people. Personally I may not be able to


accept all the advice he has offered this morning on prospective guidelines for the Board, but I would certainly welcome his advice on how to be successful and gain preference in questions of motions and other parliamentary matters.
The hon. Member indicated that many of the Labour spokesmen and researchers who had initiated or furthered the policy of Government intervention under the 1975 Act and the organisation of the NEB had felt themselves frustrated and thwarted in their ambitions by a lack of Government finance for the NEB and also by some of the policies being adopted by the Board intervening in private industry.
The NEB is seen very much as the ideological brain-child of Mr. Stuart Holland, who regards the Board, as the hon. Member for Walsall, South told us, as a sell-out. Whilst there have been pronouncements of a more positive nature from bodies like the Maxwell Stamp organisation, in its report, there are some major failings in the Guidelines and the terms of reference of the Board, which, I will seek to show, are not so much the fault of the Guidelines as a reflection of the Government's misplaced and misdirected industrial strategy.
I also question fundamentally whether the NEB, even under the substantial remit provided for it in the 1975 Act, really is able to achieve the Socialist ambitions which many people had for it. Hon. Members may consider that an improper question for a Conservative Member to ask. The reason I ask it is that if the Board is a halfway house which will not achieve the ambitions of a large number of Labour Members and is anathema to many Conservatives, it presents a most unsatisfactory situation, which will need more than a formalisation of Guidelines fundamentally to change.
It may be that this is a matter that we should look at from the beginning again in the context of what the Government are trying to do in their industrial strategy over the next couple of years. What sort of impact will the Board have, even with £1,000 million—a large sum, which many of us on the Conservative side deprecated as we deprecated also the way in which it would

be drawn down at the excessive rate of approximately £250 million a year? Even if the money is expended, will that assist in taking the country a long way down the path set out in the White Papers issued before publication of the Industry Act? Will it enable us to regenerate British industry? I suspect that it will fall far short of that.
The hon. Member for Walsall, South also made a fervent plea, naturally enough, on behalf of the many industries in his constituency and in the West Midlands. He hoped that the Board would be allowed by its articles of association and by Government directive to take substantial interests not only in the highflying companies and in the prospective lame ducks but in some of the rather unexciting companies which are primarily "non-high-fliers", as the hon. Member described them. This bears out the fear and criticism of many of us on the Conservative Benches that inevitably tremendous political pressure will be able to be exerted upon the NEB simply to follow the ambitions and needs of various Members of Parliament and their constituents. Is it correct that a dynamic industrial policy should be pursued on the sporadic basis of the needs of individual constituencies?
The hon. Member mentioned the company of James Bass. I do not know it in detail, or the reasons for the announcement which has been made. I simply put it to the hon. Member that the fact that so many companies now find themselves in receivership, or having to close down the operations of some of their subsidiaries, may well be as much a reflection of the inadequate economic and fiscal policies adopted by the Government over the last couple of years as it is of the inadequacies of the NEB and its Guidelines.
I also question whether the philosophy of increasing centralised industrial control is one that we should adopt. The hon. Gentleman obviously held high the example of IRI in Italy, but this has been one of the most dramatic loss-making public sector bodies since the war. It is an extraordinary thing to say that we should wish to emulate that in the operations of the NEB. Hon. Members on both sides of the House will share pleasure that the partial and welcome recovery in British Leyland has


enabled the NEB to have a positive cash flow even in the first six months of its operation. But if the funds are provided along the lines that the hon. Gentleman requires, and if they are applied in some of the industries which do not have the potential or the customers for some of their products, it will not be long before we end up with a massive State conglomerate along the lines of IRI. That would create a situation in which centralised control by the 50-strong staff of the Board would squeeze the generation of any new ideas in industry, simply retaining all the old inefficiencies and over-manning that still exist in many of the important manufacturing industries in this country.
The hon. Member referred to planning agreements. Labour Members have consistently regretted that industry has not availed itself of the planning agreements introduced under the 1975 Act. Is that surprising? It is extraordinary to expect industry to provide the confidential information envisaged in planning agreements, bearing in mind that Government policy statements and indications of assistance that the Government can provide have in the past been so fruitless and of so little value to industry. It is not surprising that industry has been consistently suspicious of the Government's motives and why planning agreements, I believe, will continue to fail for all but those industries which are circling the Whitehall honeypot.
It is not surprising that Babcock and Wilcox is considering entering into a planning agreement. The company regards that as a softener for some assistance such as that proposed by the recent Think-Tank report, if the comments in the Press are correct. Is it surprising that some of the prospective planning agreements are also with industries in the public sector? Even that must reflect inadequate communication between Government and the public sector. If the Government are unable, in the absence of planning agreements, to obtain from the nationalised industries corporate plans it is difficult to see why they should be able to do so simply by virtue of entering into a planning agreement.
The implied suggestion of the hon. Member for Walsall, South that Government action should be taken seems to indicate to many of us that such agree- 
ments will then become compulsory. We on the Opposition Benches say that this is a contradiction in terms, and that if the Government are foolhardy enough to force British industry to disclose plans of a confidential and commercial nature, and if they operate on the basis of information and instructions from the Government, this will be both very unwelcome in industry and counter-productive.
I generally welcome the Government's attempt to clarify the NEB Guidelines, but that is as far as I can go with the Government in a note of accord. I regret that the final direction of guidelines that has been placed as a schedule to the Industry Act is almost as vague and just as contradictory as were the Draft Guidelines issued last year. We have waited 18 months since the enactment of the Industry Act for a clear statement of the NEB's terms of reference, yet the document which the hon. Gentleman has brought before the House for consideration today is hardly a clear statement of the Board's terms of reference, and raises more questions than it answers.
I cannot escape the conclusion that the generalisations which have been employed throughout the Guidelines are a device behind which public intervention in industry can be screened from Parliament. They make a mockery of assurances given to hon. Members during the passage of the Industry Bill—particularly to those who served on the Committee—that there would be adequate scrutiny of the activities of the NEB, the policy that it would adopt and the degree to which its performance matched the original ambitions for it. The Guidelines make a mockery of those ambitions, and the Government have not held to their promises in this respect.
For example, we are told in paragraph 16 of the Guidelines that
the National Enterprise Board shall always have regard to the profitability of investments.
Yet there is no clear indication, either in the Guidelines or in the Draft Guidelines, as we sought, of the financial target that has been set for the NEB.
We are told in paragraph 29 that the NEB shall promote industrial democracy, but there is no clear indication how that is to be achieved or how the supervention of the NEB over the management control of the individual subsidiaries will


encourage within those companies experiments in industrial democracy.
I am consistently led to the view when reading the Guidelines that the Government are paying lip service to many cherished ideals of the Labour Party but are getting away with implementing hardly any of them, because they are not sufficiently precise.
The Guidelines are contradictory in several senses. They are contradictory in that they provide that the Board shall make acquisitions on its own account only when there is the prospect of an adequate rate of return during a reasonable period. That is specified in paragraph 13. Paragraph 24 emphasises the Board's responsibility towards maintaining and promoting employment, with the implied sanction that this consideration will be taken into account in reviewing the Board's performance on a year-to-year basis. These two aims are not entirely incompatible, but where the NEB seeks to take an interest in the substantial restructuring of a company or industry which may be overmanned in certain departments, it is not compatible to require that overriding consideration must be given to employment.
We hope that the NEB will pay general regard to that consideration, but the way it is presented in the Guidelines leads me to believe that it will act as a restraint on the Board's ability either to restructure many of the companies within its remit which are in difficulties or to undertake new and perhaps high technology areas of investment.
We are told in paragraph 32 of the Guidelines that the Secretary of State will be answerable to Parliament for the exercise of his powers under the Industry Act 1975. Consistently, the Opposition have expressed regret and disappointment about the inadequacy of information provided to Parliament, and the total lack of accountability on many important issues which the NEB has a large degree of autonomy in deciding for itself. My hon. Friend the Member for Surrey, North-West (Mr. Grylls) on several occasions has sought information about the anti-cyclical stockpiling scheme for which the NEB has provided some finance, but we have been told curtly by the Under-Secretary of State that this in- 
formation is unavailable as it is within the day-to-day remit of the Board.
I understand and have some sympathy for the difficulty of maintaining a balance between accountability to Parliament and the need not to intervene on a day-to-day basis in the Board's management—or in any other public sector industry. Yet the anti-cyclical stockpiling scheme is an important example, because it was a new departure for the Government to provide money for the stockpiling of goods in, for example, the machine tool industry. I understand that Alfred Herbert has been responsible for taking up most of the money that the NEB applied for that purpose.
It is proper that Parliament should have the opportunity to consider a statement on the policy adopted by the Board on the proportion of its total funds that it is applying to this area. It is important, because our constituents share a financial liability in this matter. The Government seem to be adopting a new industrial approach in not only encouraging industry to stockpile but providing money to encourage the NEB to move in when industry fails either to take up the money or to do it of its own accord. Then the Government say that they will do it for themselves.
The Government are financing the Marathon standard jack-up rig at an estimated cost of £30 million. They are financing the Maritime Fruit Carriers' tanker, and there is the prospect of another one being ordered speculatively. There is the prospect of the Government's financing the massive coal-fired Drax power station to the extent of £500 million. It is a new departure for the Government to finance and undertake speculative projects on their own long before there is a demand for those facilities. There are grave and serious dangers in this. When the NEB is financing such projects itself out of public funds it is proper that the Opposition should seek an explanation. Therefore, I regret the lack of information.
It is a shame that we have not had more opportunity to consider the British Leyland Mini programme. I understand why Parliament should not try to intervene or over-restrain individual day-to-day planning decisions within public companies, but we all know that the NEB's


major interest is in British Leyland. We also know that the future hopes for British Leyland are pinned on the success of the Mini. Much of the money we have provided will go to finance the development of that model.
When we discussed these matters—frequently after midnight—we did not know much about the Mini development as very little information was available. We would have welcomed the opportunity to discuss that application of finance. We learn that the initial cost will be about £120 million of taxpayers' money, but the House has had no opportunity to discuss it.
Is it surprising that many of us feel resentment and suspicion that the Government are providing at arm's length a State holding company which will not be accountable to us and which will be able to spend a massive amount of our money and enter into obligations and liabilities for which my constituents in the last resort will have to foot the bill? It is proper that we should make these criticisms and ask for reassurances.
I have several specific questions on the Guidelines which I hope the Minister will find time to answer. We are told in the final form of the Guidelines that contested acquisitions will be allowed to go ahead only if the NEB first seeks the consent of the Secretary of State. Will the NEB always advise companies of the interest that it acquires in them? The activity of building up an interest in those companies is a piece of information that it is important for the companies to know, certainly if they employ large numbers of people.
As these prospective investments have to be referred to the Secretary of State, where the board of directors does not want the NEB to take an interest, what is the "reasonable time" for the Secretary of State to consider the request? Will this be an opportunity for the Secretary of State to delay the decision as happens with so many other critical industrial investment decisions, particularly in the steel industry? By introducing a degree of blight over the future of that company, he ensures that the company is unable to rescue itself or to raise money outside the sphere of public interest. Therefore, I would seek clarification of what is a reasonable period of time for the Secre- 
tary of State to consider whether the NEB should go ahead in acquiring a stake in a company against the wishes of those directors.
My own view, as I have consistently expressed, is that it cannot be desirable to buy companies that do not want or need NEB finances. When Government and public funds are by definition limited, it must make sense to apply those funds to the greatest possible benefit of the people.
When the hon. Gentleman talks about taking an interest in companies, restoring them and improving their profitability, and then holding on to that interest, I must say to him that it ought to be a consideration beyond the bounds of party discussion that as these funds are limited and as a company is doing well, what is the point of maintaining the funds in that company? If one has the funds, why not apply them in areas of desperate social need? Surely, as a basic principle adopted by both major political parties, money should go to areas of the greatest need. When a company is doing fine thank-you and does not want the money or the control of Lord Ryder and his team, what possible reason is there, in politics or logic, for such companies being taken?
Secondly, in paragraph 8 of the Guidelines we are told that disposal of equity stakes in companies will be severely constrained, in the sense that the Secretary of State himself will decide on many of these maters. I should like to know why so many constraints are applied on the NEB in the sale of investment which it undertakes. If we are to allow the NEB the autonomy to decide on a day-to-day basis what stakes and acquisitions it will make, what is the reason for the substantial powers of interference and restraint by the Secretary of State over the Board?
Thirdly, in paragraph 12 the investment criteria for the Board are set out. We are told that the Board must look for an appropriate discounted rate of return. What on earth does that mean? Consistently we have sought information on what an adequate rate of return on assets employed will be, either of companies owned by the NEB or by the Board itself, yet we have consistently failed to have an adequate answer from the Government.
We are told that the Secretary of State, in individual cases, will direct the criteria to be adopted by the Board in deciding to go ahead with a stake, but how will this work mechanically? What assumptions will the Secretary of State make about, for instance, the rate of inflation over the next few years? How will he physically translate Government policy and the acquisition by the NEB in each individual case brought to their attention by Lord Ryder into the recommendations? In other words, when Lord Ryder decides to go ahead and take a share in a company, and when it is a major investment that is required and the Secretary of State is considering, in deciding what criteria should be adopted, whether it is an adequate investment for the Board to make, how will the Board obtain the Secretary of State's advice on the criteria to be adopted?
Does not this paragraph in fact mean that far from allowing the NEB autonomy in these matters, there will be a real and continuing degree of interference in every acquisition by the Secretary of State? If not, why does the Secretary of State have the power set out in that paragraph to direct the criteria to be adopted in individual investment situations?
Further, why should the NEB assume responsibility itself for wage negotiations and conditions of employment in the subsidiaries? Does this not imply very serious problems for each of these companies in the degree of management control which the levels of management in those companies will adopt? How will the Board override the conditions of employment and wage negotiations which may be conducted at company level and imposed on employees? Is this desirable? If it is, how will it actually operate? There is certainly no enlightenment provided in the Guidelines.
We also question whether the Board has the expertise to do this, with the band of 50 going through the list of stocks and shares like runners in the 2.30 race. It is difficult to see how, as well as picking high-fliers, they will supervise conditions of employment and wages within all these companies.
Is this not once again simply a trite statement to pay lip service to the ambitions of many Labour Members, that such bodies should assume certain

"social" responsibilities, when in reality there will be no way at all that this can be implemented? However, if the Minister genuinely has the conviction of some of the statements provided in the Guidelines, he should provide the House, and particularly some hon. Members, with some reassurance on this matter.
We are also told that the annual corporate plan will be provided by the NEB, in addition to its statutory duty to provide a report to Parliament on the proceedings and success of its investment policy for the year. We have an opportunity to look at the annual report and, I hope continuingly, the interim report of the NEB. I should like to know whether the annual corporate plan—that is, the forward-looking document setting out the strategy of the NEB—will be published. If it is not published, will it be presented to Parliament for consideration by, possibly, certain Select Committees? Shall we have an opportunity to discuss some of the particular loans strategy being adopted by the NEB on a year-to-year basis?
I should also like to know when the 1976 report will be available. I suspect that this may be fairly soon. While, regrettably, we have not had an opportunity even to look at some pro-forma figures before today, I should like to know when the next report will be available.
We are told in the interim report for June and in the guidelines that information provided to Parliament and the public on operations of the NEB will comply with the listing requirements of Stock Exchange companies. However, perhaps the activities of the NEB are much wider and fundamentally different from those of many companies. There is an obligation on the Government, as much in setting an example as in statutory requirement, to ensure that the fullest information is provided to Parliament. Many of us regret that, for instance, there was not an adequate breakdown of the loans made by the NEB to many companies and some information on the anti-cyclical stockpiling scheme in the interim report. I hope that this will be corrected in future publications of this kind.
We should also like to know, in furtherance of many Questions that have


been tabled on this matter and following up many assurances given during the passage of the Act, whether future publications on the NEB will differentiate between the performance of investments undertaken by the NEB itself and those done under directive or Section 3 of the Act.
It is of course wrong—I think that many Labour Members would be sympathetic towards this—to look at the performance of the NEB in toto, because it is undertaking two separate functions. One is investment of its own decision and accord, which it hopes will be profitable and will do something for the industries. The other is investment under direction by the Secretary of State. In deciding whether the Board is doing a good job, it is proper that those two holdings should be accounted for differently. This was not done in the interim report. I understand that moves are afoot to ensure that that is corrected in the future. Perhaps the Under-Secretary will provide some assurance on that matter.
However, how relevant are these Guidelines to the NEB when effectively the financial remit has been stripped away from under it? Although the Chancellor, as the hon. Gentleman mentioned, provided some £50 million extra to the remit of, I think, £275 million which the Board will spend in this financial year, 1977–78, I wonder just how much discretion the Board has over the drawing down and spending of that money. Does it in fact have a degree of flexibility and a wide remit to be able to spend that money, or is it already largely accounted for, perhaps, in terms of loans provided to British Leyland and some other commitments?
One suspects that there will be substantial drains on the Board's committed funds and very little left over for any major new initiative in the public or the private sector. I personally do not regret that. It goes along very much with my own philosophy. But once again, in deciding whether the NEB is conducting a satisfactory job, from the point of view of anyone in the House, it is important to know whether it is at a half-way house and just how much money it will have freely available and not committed in this financial year to spend on investment.
About £250 million was provided last year, and although some people may welcome some of the money provided by the Chancellor's last and ninth Budget of this Parliament, nevertheless we want to know how much is committed and how much is freely available.
The size of the investments undertaken by the National Enterprise Board and other commitments, either to consortium finance in seeking trade contracts or some of the funding of stock-piling schemes to which I have referred are of interest to hon. Members on both sides of the House.
The hon. Member for Walsall, South spoke of the investment policy of the NEB and its strategy as regards the size of investments, and he welcomed some of the smaller holdings which it had taken on in recent times. But if the Board is to comply with the objectives set out in the 1975 Act and the White Paper, The Regeneration of British Industry, which preceded it, how can some of its smaller holdings be justified? It may be fun for Lord Ryder and his team to pick out high-flying stocks and push money in and out of smaller companies, but will this regenerate British industry? If an investment, which is relatively small in overall terms, is taken in, for example, an electronics company—however dynamic and well publicised, and however patriotic—how will that regenerate British industry, employment and our export prospects in the next few years?
I question the industrial strategy and investment strategy which Lord Ryder's team has adopted. Is it right that the policy of backing certain major projects should continue in certain areas? Is it the right policy to back certain projects or strategic investments to stimulate investment elsewhere? Lord Ryder has mentioned the importance of regenerating the car industry, in terms of the spin-off effect which it will have on thousands of supplying and associated engineering companies throughout the country. He also mentioned, as a rationale of for the board's rather disastrous investment—happily, not over-large financially—in the Venezuelan project the prospect that, if such a trade project gets off the ground it produces a stimulus for many industries throughout the country to tool up. This may appear


attractive as part of the investment philosophy of a public sector body, but is it as sound as it appears? If we provide public money—or even private money, since the same argument applies—for a major new idea, a major industry or a major contract which is itself unsound in the sense that people do not want the products at the end of the day, in the sense that the consortium does not get off the ground because we are beaten on tender by another country, it will have a debilitating effect throughout British industry, because many industries will have tooled themselves up in readiness.
The Mini project itself may be a disaster or a success. We all hope that it will be a success, but the actual investment decision is tremendously important, not only because it might stimulate investment in other industries but because if we encourage those industries in advance of the success of the project to tool up, to employ more people or to continue in their present form instead of diversifying, at the end of the day we shall have done a great disservice to British industry, which we shall all pay for, if the project is not a success.
Is it right that the NEB should decide on matters of such tremendous importance? Does it have the necessary commercial expertise to undertake the right trade project, such as the Venezuela contract, or, on the other hand, to know that it is right for British Leyland to undertake the Mini development or for Alfred Herbert to undertake, perhaps, a new line in machine tools for export? If the individual investment decisions of the NEB—for example, I understand that the Mini project was considered at length—are wrong, the effect on many companies outside the NEB will be disastrous.
Therefore, the Government and Lord Ryder cannot deny the responsibility that they have for ensuring the success of every individual investment undertaken by the NEB. As I say, I question whether it is the right body to do it, and whether it has the right range of expertise and abilities to ensure that its success ratio of investment is as high as we all hope it will be.

Mr. Max Madden: I believe that in the past the hon. Member has been associated with Slater Walker.

I should have thought that anyone who had had such associations would have some modesty about offering advice on investments, particularly in manufacturing industry. Does he agree that the investments of Slater Walker had a vastly debilitating effect on British industry because so many of its financial activities were far removed from expanding British manufacturing industry, and a great deal were concerned with asset stripping?

Mr. Nelson: It is true that two years ago I terminated my employment with Slater Walker Securities. I happen to believe that many of the reasons for failure of the company, as with many secondary banking companies in the City, were fundamentally bad investment decisions in that too large a percentage of funds was applied to property at the wrong period. But I do not accept the criticism that there was a substantial amount of asset stripping at that time. There were many companies then taking an investment interest in others with a view to rationalising them, but I do not believe that that in itself was the fundamental reason for the failure of the company—a failure in relative terms only, because it is still a quoted Stock Exchange company. I do not think that that is particularly relevant to the point I am making.

Mr. Madden: It is closely relevant.

Mr. Nelson: I suspect that the hon. Member for Sowerby (Mr. Madden) intended to raise it as a rather cheap and implied criticism, but if he wants to attack my argument he should take what I have said. I was talking about the investment strategy of the NEB and the extent to which its major investment projects will have a spin-off effect on the rest of British industry. If the initial investment decisions are wrong, they will have a bad effect on other companies. If the hon. Member disagrees with that, let him say so. It has nothing to do with Slater Walker.
We cannot afford to spend public money where it is not needed. The idea that the State should invest in profitable manufacturing industry is both misguided and prompted by the child-like frustration of Labour Members with the past performance of nationalised industry. Good public money should not go after


bad. It should be applied elsewhere, not to profitable companies. If we take a stake in a major public company which is profitable and is already sucessful in its activities, such as a pharmaceutical company, what is the point in continuing that stake unless we feel that we can make more money by injecting State control or finance? There may be certain political considerations behind a wish to take an interest in or control of such a company, but, if they are political consideration let that be said. Let it not be wrapped up in a cloak of commercial justification. That really will not do.
There is no point either in investing in or retaining a stake in a company which cannot do better as a consequence. If it can do better, there may be some force in the arugment for it, but if it will not do substantially better in terms of employment, profitability and contribution towards desirable national performance—for example, in exports—what is the point of providing limited public funds for such investment? How much better it would be to transfer such resources to one of the other areas of need. What is the point of holding on to such interests, or what is the point of acquiring them in the first place?
I suspect that the real reason lies in the overall philosophy behind extending State control and initiative in order to centralise the control and organisation of British industry, regardless of any benefits or troubles which this may bring to the companies involved. It is unlikely that a successful company will improve its performance under State management, so what is the point of simply transferring ownership of the shares in such a company from the private to the public sector? As I say, if it is done for political reasons, let that be said, but let us not cover it up with a false justification in commercial terms.

Mr. John Garrett: Is the hon. Gentleman aware of the improved industrial performance of ICL and Ferranti under State ownership?

Mr. Nelson: Perhaps the hon. Gentleman misunderstands the point I am making. I do not say that in every instance companies do better under private ownership than under State ownership, but it may be that for a variety of reasons

their performance improves. If one takes a company that is doing really well and it cannot reasonably be supposed that its performance can be improved either in terms of the tax it pays to the Government or employment, what is the point of using public funds to buy a share in that company? Surely it would be better to use funds where they are needed in an area where industry is not doing so well. That does not happen to be my philosophy. We might share the same view about Government allocation of funds for social purposes, but to lock up funds in successful companies because hon. Members on the Government side want to balance the successful areas of the public sector with successful parts of the private sector is not sufficient reason.
I understand the frustrations of disappointing performance by many nationalised and State-controlled concerns, but it does not logically follow that one should provide on the other side a State holding in profitable companies, because if a company is successful the Government benefits from the tax that it pays. A dividend contribution from those companies will be no more substantial than that which could be obtained by circulating money in the community.
The idea that the Government's industrial strategy must be administered like ICI providing offsetting finance for successful and disastrous companies is to apply a commercial logic to something which can never be commercial. That represents the acquisitive attitude of Government and I believe that the philosophy of the Labour Party is misplaced.
It seems that many hon Members have not thought through the using of social funds. It is not therefore surprising that bodies such as the British Association of Chambers of Commerce have regretted the failure of the Government to provide satisfactory guidelines for the future. In describing them as vague, they bear out many of the criticisms made by many of us.
In conclusion, the Government should take these Guidelines away and think again. They will fail to produce adequate guidelines as long as their industrial strategy is fundamentally unsound and misguided. They should reconsider the whole of their industrial strategy.

12.34 p.m.

Mr. Norman Atkinson: There is a degree of poetic justice about the three debates on the Order Paper today. Yesterday was the 40th birthday of Tribune and that is reflected on the Order Paper. We have also been able to hear the Tory whiz-kids from the City, who the Tory Party tell us represent the future leadership of their party.
I shall take up no more than three of the arguments raised at the begininng of the debate by my hon. Friend the Member for Walsall, South (Mr. George), to whom we are indebted for initiating the debate. He spoke about the accountability of the NEB and about the things that he would like to see done from now on. He drew our attention to a number of issues.
I shall address some of my remarks to the slump conditions through which we now are passing. We must try to clarify our language more precisely and not use that which is more applicable to the 1930s. We have moved on and our problems qualitatively are different from the problems in the 1930s and the years immediately after the war. We have a crisis of employment and pricing. The crisis is demonstrated by the rate of inflation that we have suffered in recent years and by rising unemployment which all the offices along Whitehall anticipate will rise to 1·6 million or 1·7 million later this year. In any language that is a critical situation of the severest proportions. Against that background we should look at the Guidelines within which the NEB has to operate and at Government strategy.
The current situation is caused by the inability of the capitalist system to reallocate its resources. That is brought about because there is no wealth-creating mechanism within the system and because a rising proportion of our effort is taken over by the multinational and transnational organisations. It is also because our technology has enabled society to produce and construct all that it requires with no more than one-third of its workforce. Those factors together create the basis of our present problems. Against that situation we must look at the efficacy or otherwise of the NEB and at what is happening.
Under their strategy the Government are attempting to achieve a shift of resources

from the service industries to manufacturing industries. Criticisms have been made about the money supply and the borrowing requirement. In order to overcome the financial starvation from which manufacturing industry is suffering the Government, through current strategy, are attempting to achieve that shift.
The Government have no powers of intervention. Whilst they are able to talk about NEB Guidelines, they have not extended those Guidelines anywhere else. But if the Government are concerned about rising unemployment and the intensity of the critical situation facing us, they must do something about the power of intervention. They must attempt to use the Guidelines set up for the NEB in those other areas of the economy where crucial decisions will be made. The Government are impotent in this situation because the decisions affecting the rate of employment in the future or the rate of production are confined to boardrooms in the private sector. The Government have chosen not to intervene in that process of decision making.
When credit is available the Government do not instruct banks about where that credit should go. But selectivity still operates. Because the criteria in our society are measured by profitability it is likely that any resources that banks have will go to those areas that are most profitable. Investment is more likely to take place in entertainment than in manufacturing industries. So long as the NEB has no right and the Government have no desire to intervene in the use of credit and declare that their strategy is to achieve a shift of resources from the nonproductive areas to productive areas, our problems will remain. The Government appear to be ignoring what is happening and resource allocators are deciding their priorities on the basis of profitability. It is a contradiction. Therefore, we are dependent on the NEB.
The NEB should take over the job of talent spotting that used to be done by institutional investors, such as the Prudential. Management ability in some areas of industry is abysmally low, but we have no way of spotting the managerial brilliance that undoubtedly exists and of using it where it is most needed. For some managerial jobs in the public sector the Government do not have a clue whom they should appoint. There is a


reservoir of managerial talent which is untapped because there is no system whereby the Government can encourage potential management. The NEB should be establishing a method of recruiting that sort of talent.
I do not know how many people represent the NEB on the 13 or 14 companies in which it has a holding. I do not know how many people it has in the board room even where there is a 100 per cent. stake. I suspect that there are very few. To whom do those few people report? Is it to the Treasury or the Department of Industry? With whom do they discuss the problems? I suspect that there is no communication between the people who represent the NEB in the board rooms of those companies and those who are attempting to design our strategy. I hope that it is nothing like our experience of our one representative on BP, where there is no communication, except with the Treasury.
There has been a failure to co-ordinate and to think in terms of the industrial strategy that we want to develop. We have not thought about how to use effectively organisations such as the NEB to extend the area of accountability and democracy in industry.
It is my purpose in politics in the months ahead to persuade my colleagues certainly in the leadership of the Labour Party, that we must set about the job of creating once again an economic directorate. I do not want to reopen the wounds of yesterday by talking about the Department of Economic Affairs and other economic organisations, but I want to see in our manifesto for the next General Election a commitment to create an economic directorate. I want us to say that we shall dismantle the Treasury and have a different organisation within Government, with a different allocation of resources. We must break the power of the Treasury, which by its very existence has almost broken the power of the Labour Party.
I want a different attitude to industry. We must be able to recognise our priorities. I want the Labour Party to campaign at the next election on the basis that we shall intervene in the economy to do things more intelligently. We need different instruments, a different mechanism, for doing that and for co-ordina-

tion. Therefore, we must look to the future of the NEB, and we must do something about the problem of unemployment and inflation.
We often forget that the position of British industry is different from what it was. There is a great deal about which we can be proud. The story of British industry is not one of failure. In the nuclear industry, the chemical industry, aircraft, electronics, avionics, the whole of transport engineering and civil engineering, British leadership is universally recognised. In some industries our engineers, academics, physicists and so on are way out in front. Therefore, there is great hope for us.
The tragedy is that our economists and economic thinkers are so far behind the ability of our engineers and scientists to create the future. We must ensure that we have in our economic management an ability that is equal to our engineering and scientific skills. If our economists can be equal to the rest of British science, the future is ours.
The job that politicians must do is to create the democratic institutions whereby it is possible to make sure that these changes occur and that we resuscitate the British economy and ensure a rising standard of living for the British people. In that, I have confidence in the NEB, its Guidelines and this Government.

12.48 p.m.

Mr. John Garrett: I, too, am grateful to my hon. Friend the Member for Walsall, South (Mr. George) for giving us an opportunity to debate this crucial area of national policy.
The National Enterprise Board has always seemed to me the most promising of the three main elements of the Government's industrial strategy. I have never held out all that much hope for planning agreements, given that they are voluntary, that they are not to be set in the context of a national plan for industrial reconstruction, and that they are to be handled at the Government end by career Civil Servants in the Department of Industry rather than by professional planners and analysts in a specialised Government planning commission.
Our Civil Service has a number of great strengths, but management, particularly in the higher Civil Service, is not


one of them. Capacity for intervention in investment decisions and planning systems is clearly not a Civil Service forte. Perhaps if the Civil Service had been reformed along the lines of the Fulton Committee recommendations all those years ago we should by now have the instruments we need for interventionist planning, but it is clear that the Department of Industry does not have them.
Nor do I place all that much hope on the NEDC sectoral studies, which suffer from the fundamental weakness that will always handicap the NEDC. It can pinpoint obstacles to industrial growth and improved industrial performance and describe them beautifully—it has done so for the best part of 15 years—but it is not attached to any machinery for making things happen.
I am well aware of the old saying that time spent in reconnaissance is never wasted, but time has been spent entirely on reconnaissance. That seems to have been less than helpful at a time of industrial decline. The NEDC has spent the past 15 years doing very little else than reconnaissance, although it has been done elegantly.
The Department of Industry would do well to study the French planning system. It is now in its 30th year and is clearly a major contributory factor to the enormous industrial growth of France compared with Britain in post-war years. The French planning system began as a plan for nationalised industry, the part of industry that the French Government could directly control. It then moved on to a national planning system and produced plans for key sectors, incorporating targets and performance indicators, and individual planning contracts—much as we originally proposed should be the nature of our planning agreements—with specific firms, backed by the sanction of price controls.
The French system, which has made an enormous contribution to the growth of French industry, is based primarily upon a national planning system but has moved on into sectoral plans and plans with individual firms. It is run by a planning office staffed by public servants with a professionalism and single-minded dedication to the ideal of rebuilding the French

State that our civil servants, as a result of training aptitude and attitude, simply cannot match. If planning in any meaningful way is to get started in Britain, it must be placed in the hands of a planning Commission—an independent planning agency at the centre of Government.
The NEB, on the other hand, seems to have a lot going for it and an enormous task in front of it. Many developing countries have construed the need for such an organisation in an effort to promote the industrial investment that the private sector cannot or will not take on. There are direct NEB equivalents in Sweden and in Italy. There are State holding companies in France and there is a relationship between the Japanese merchant and manufacturing combines and their Minister of Trade and Industry that is so close as to achieve much the same effect. Even in West Germany, the ideal of private enterprise and capitalism, the Government have direct holdings in 87 companies and indirect holdings in a further 729, making the Government the largest single investor in West German industry.
There is clearly industrial logic in a modern State that leads Government to direct investment in manufacturing industry in the national interest. It leads them to set up machinery comparable to that proposed in our NEB. However, the NEB is to some extent handicapped by that sudden rush of timidity that so often overtakes policy of the Labour Party between a conference decision and implementation by a Labour Government. First, as the Guidelines make clear, the NEB cannot move a muscle without the permission of the Secretary of State in acquisitions, joint ventures, capital projects and any other areas of its activity. Therefore, it must be slower in reaction than a comparable private group.
The NEB has been allocated only about £1,000 million for the next three years of which nearly half will be required for Leyland and Rolls-Royce. The task ahead of the NEB clearly calls for a budget of at least £1,000 million a year. With its free budget of about £500 million over the next two or three years it is supposed to prepare the economy for growth by investment in capacity in key sectors of manufacturing industry, to improve the balance of payments and create


new jobs in areas of high unemployment. I assume, though it has never been given this priority, that it is to advance public ownership in profitable manufacturing industry.
The lack of funding for the NEB must clearly be the main handicap in its development. The Government, who are pledged to industrial reconstruction, must make an increase in funds for a very high priority for public spending. In addition, I would judge that the NEB is already being lumbered with the rôle of industrial odd-job man. It has twice set itself up as lead subcontractor for large export projects—for example, a railway in Venezuela and a desalination plant and power station in Dubai. It was also to run a machine tool stockpiling scheme. Each of these tasks must hinder the accomplishment of its main priorities. Certainly, each job needed to be done, but special agencies should have been created to carry them out.
The NEB has already improved the performance of its subsidiaries—namely, ICL and Ferranti—and is building up a stake in machine tools and instrumentation, both chronic industrial invalids. Most interestingly, it has arrived at agreed purchases into Twinlock, Reed and Smith, Data Recording Instrument and Sinclair Radionics.
The Sinclair case shows that the epitome of the small, very successful high technology entrepreneur—Just the sort of business that the country must be good at if we are to succeed as an industrial nation—could not obtain the funds that were needed from the private sector. It was a ready-made case for the NEB, the private sector having failed a company that clearly should survive and grow.
There are similar cases in Scotland where the sister agency to the NEB—the Scottish Development Agency—has acquired stakes in Ranco Motors and Munro Knitwear because of approaches to it by the bankers and managers of those companies. The evidence is that companies are only too willing to involve the NEB in its affairs because the private sector has failed them.
I am led to conclude that the NEB will increasingly be seen to be an essential instrument for the survival and reconstruction of British industry, but I want to see it develop along a number of lines.

First, I want to see it involved in import substitution, an area much neglected, I regret to say, by the Department of Trade. That being so, it must be up to the Department of Industry to do something about it. In several important engineering sectors Britain now has a trade deficit—for example, in office equipment such as typewriters and duplicators, in ball-bearings and bottling and packaging machinery, all fast growing sectors and all with substantial deficits. In other sectors there is now a high level of imports—for example, in machine tools, in farming machinery, in excavating machinery and in pumps. These are all high-growth sectors.
In every boom since the war there has been a shortage in capacity of small electric motors. This has led to massive levels of imports. Already I notice that people are beginning to talk of yet another shortage of supply. Import substitution is always very much more cost effective than export promotion, and the NEB should concentrate on that and pinpoint for investment the areas that I have mentioned.
The second area on which I shall concentrate is the provision of management. The NEB should be a nursery for talented managers who can be deployed in the national interest in firms in which management is the prime weakness—and there are many such firms. It is fairly clear in my constituency that a major industry, namely the footwear industry, which is in rapid decline, is handicapped by lack of expert managers in design, marketing and exports. I believe that such industries could be assisted if the Board could set itself up as a forcing house for talented managers.
The third is the need for a banking arm to the NEB—a source of capital particularly for small businesses, coupled with the supply of able management. In my view, it should start—and perhaps eventually hive off—a small businesses bank, providing seed capital for innovation and new industries. Our private banking system still does not provide the funds and encouragement and technical assistance for the small business with potential.
The fourth requirement in a regional dimension is to assist not only in areas with high unemployment but in areas


of low wages. In Norfolk, for example, a single investment by the NEB in one high-wage high-technology business, such as the NEB already has in its portfolio, would have a disproportionate effect on job prospects and wages in industry in that county. The Government must learn that deprivation is not confined to our urban and industrial areas but occurs in the countryside in small towns and in individual cities in the regions. The NEB could have a substantial effect on the situation at relatively low cost.
The argument for a powerful NEB can be made on technical, managerial and efficiency grounds. It occurs to me that more and more managements in industry will recognise the force of these arguments. But the NEB is, or was originally, part of a much wider ideal—the ideal of community and public involvement in the regeneration of our industry in an attempt to reverse 100 years of relative decline which the private enterprise system has not only failed to reverse but has actually caused. The NEB should be at the centre of national industrial policy.

1.4 p.m.

Mr. Max Madden: I wish to join in the tributes paid to my hon. Friend the Member for Walsall, South (Mr. George) for giving us this opportunity to discuss the activities of the National Enterprise Board and the Guidelines on which it operates. Indeed, the present motion and that on unemployment to be introduced later by my hon. Friend the Member for Darlington (Mr. Fletcher) are closely intertwined. I am sure that the major concern of Labour Members about the NEB and industrial strategy is based on our worries about unemployment and the need to promote employment throughout the United Kingdom.
I very much agree with the comments made by my hon. Friend the Member for Norwich, South (Mr. Garrett). His analysis of the problems and his suggestions for fresh activities by the NEB and the suggested new emphasis for the Board were most sensible.
We must recognise that industrial decline in the post-war years has been accelerating. We must also recognise, as do many people in private industry, local authorities, the trade union movement

and many other organisations, that only Government interference holds out hope for avoiding any further decline and providing the momentum and stimulus to maintain our industrial manufacturing base, and for expanding it. We must also recognise that in that task the NEB has a major rôle to play in spearheading the expansion of manufacturing industry.
Those of us who take an interest in these matters are only too aware of the fragmentary powers now available to the Government. We all know the sorry tale of what happened following our great hopes when we arrived in Government in 1974 of implementing the industrial strategy in which many of us had been involved for many years before coming into office. We found that the powers available to Government were emasculated and in an extremely weak state. The reality of the industrial situation is now impinging on those responsible for changing policy and direction. They recognise that the strengthening of our available industrial legislation is long overdue. I hope that there will be new resolution and conviction in providing the NEB with adequate resources to undertake its important task.
The NEB must also command much greater industrial and political support than it has hitherto. As a member of the Expenditure Committee, and having heard evidence from senior officials from the Department of Industry and from senior members of the IDA and other authorities who have been closely concerned with the work of the Department of Industry in its intervention in industry, I have become greatly concerned by the attitudes publicly displayed in that Committee when those senior officials have been questioned about the rôle of the Board and the Department of Industry as an influence for intervention within industry. I very much hope that some of those civil servants, faced with the industrial reality, which they see round them, are changing their attitudes and becoming far more in favour than they appear to have been so far of the policy of Government interference and the vigorous activity of agencies such as the NEB.
A great many people are uncertain about the powers, policies and attitudes of bodies such as the NEB and the way in which the policies and powers can be implemented. Apart from a fleeting


presence by a junior Minister from the Department of Employment, there has not been in this debate any representation from that Department. We know that the next motion involves that Department, but surely it could have enabled one Minister to be present for the bulk of this debate. However, perhaps that can be remedied in other ways. I wish first to refer to the activities of the NEB in regional spheres. I am very pleased that steps have been taken to establish NEB offices in the North-West and North-East, and to know that there will be the closest co-operation between the Board and the Scottish and Welsh Development Agencies. That is an essential framework and a move we must all support.
My hon. Friend the Member for Norwich, South has expressed concern about the absence of activities by the NEB in other important regions. I refer to West Yorkshire, an area of which I have the honour to represent. I wish to refer to the textile industry in which that area is greatly involved. We have brought our complaints to the House time and again. We have complained about the effect on employment of schemes such as the Wool Textile Scheme and have called for the implementation of powers that are available in the Department of Industry. Those powers which have had a beneficial effect in rationalising and assisting many firms in the textile industry could be used to overcome other problems which have had the effect of creating unemployment in West Yorkshire. That area is suffering from the ravages of previous industrial revolutions and is facing enormous industrial dereliction and is now seeking to increase its industrial activities and to overcome many historical problems in the area.
It is in exactly that type of area that the NEB could play a positive rôle in trying to arrest the spiral of decline which we see throughout the United Kingdom but particularly in areas like West Yorkshire and Calderdale, which I represent. The NEB should be looking in those areas for opportunities to play a positive rôle in industrial regeneration.
For instance, what is the attitude of the NEB to taking part in joint ventures with local authorites and private companies in an attempt to regenerate industry? In Calderdale, the West Yorkshire

County Council and the Calderdale District Council are interested in examining what powers they have as local authorities to enter joint ventures, I suggest with private interests, in trying to create circumstances in which we can promote employment, avoid factory closures and do something positive to regenerate manufacturing industry. I should appreciate information on that point, which does not seem to be included in the Guidelines.
My second point relates to import substitution, something which we have as a nation neglected at our peril for a long time. Despite the welcome surplus in our trade position announced in the last few days, imports remain a tremendous burden. We must of course pay greater attention to increasing exports, but there are equally important areas of import substitution which could benefit the belance of payments. What specific areas is the NEB considering in this regard? It could take a lead here in providing an important impetus to industry.
My third point is the relationship of the NEB to small firms. So far as it is identified by the public, the NEB is largely associated with big concerns like British Leyland. Although my hon. Friend the Member for Norwich, South has given valuable information showing that that is not the case, it is true that up to now the NEB seems to have been predominantly concerned with large industrial concerns rather than small ones.
Many of us believe that there is an important rôle for small firms in innovation and regeneration in areas like mine, and in research and development. I am sure that many of us are very sad that recent figures show, for instance, that the money available through the National Research and Development Council has not been taken up to the extent possible. The Department and the NEB could do a great deal to encourage, guide and advise small firms.
The NEB also has an important rôle in encouraging and expanding a co-operative approach in industry. What is the present position of the Meriden co-operative, which has captured the popular imagination and is important to the trade union and labour movement? What will be the attitude of the Department and the NEB to applications for the


establishment of other co-operatives? I hope to be having further talks with the Minister's colleagues in the Department about the possibility of establishing textile co-operatives in my area. What is the major criterion on which his Department judges applications to establish co-operatives and what will be the general approach of the NEB?
My fourth point relates to the major task of the NEB in promoting and protecting employment. There have been proposals in my constituency in the last month for the closure of three textile factories, threatening redundancies of about 800 workers. Unemployment is already high in the area and the closures will push it to more than 20 per cent. in some parts of my constituency. Because of the decline to which I referred, there are precious few alternative openings in the area. These closures will be a severe blow to the efforts which are being made to increase industrial activity. What powers do the Department and the NEB have to intervene directly in such situations?
I recently raised on the Adjournment the problem of the Moderna blanket manufacturing works in my constituency. I will not go into the details now, but there are surrounding circumstances which provide good reasons to believe that Common Market business men are seeking to exploit the free access of goods within the Common Market by distributing their own manufactures, imported into the United Kingdom, under well-known United Kingdom trade marks and labels.
It appears that the British Government are virtually powerless to intervene, whatever the impact on British employment or the balance of payments. The key to this worrying problem appears to be the establishment of United Kingdom-registered companies by Common Market industrial interests, which can then be used to acquire other such companies, which in turn can be promptly closed down, their workers sacked and any assets sold off, leaving the way open for the imports to be distributed under the label of the United Kingdom company taken over.
This can be seen as a growing and sinister trend if one appreciates the

United Kingdom's new situation in relation to free access of goods, capital and labour brought about by Common Market membership. At present the Government seem powerless in a situation in which the United Kingdom is particularly vulnerable, especially those firms with well-known labels. What powers does the Minister believe are available to help us combat that worrying trend? It is being seen now in West Yorkshire, but it will be seen in many other areas as time goes by.
I would draw my hon. Friend's attention to an article in last week's Sunday Times written by a proclaimed member of the middle class, who had done all the right middle-class things, by working for the BBC and as a journalist and having all sorts of well-placed relatives. For reasons best known to himself, he took off to join the working classes. We often hear views expressed in this place about what is wrong with British industry, about the workers and about virtually everybody but ourselves. Every hon. Member would be well advised, instead of making one more speech, to take time off to read that article. It was a graphic account of one man's experiences in a variety of jobs in different sections of British industry, which exposed to public view a worrying situation which has been getting worse for decades.

Mr. Atkinson: They should take a shop-floor sabbatical.

Mr. Madden: Yes, that would be extremely useful. It would offer many hon. Members obviously uncomfortable information. It would certainly explode many of the myths and prejudices on which they survive. The article showed what is wrong with British industry and what we need to put it right.

Mr. John Lee: I recollect an outstanding instance of this happening. I understand that my right hon. Friend the Member for Blackburn (Mrs. Castle) took a job as a cotton operative not long after she was first elected to this House.

Mr. Madden: Indeed, and other Members who have taken an interest in these matters and have acted similarly have always found it a useful experience.
The article pinpointed the inefficiency and incompetence of management, pointing out that there was no genuine willingness or desire by those responsible for taking important decisions to take the advice or views of the working people—often, people with long experience and important skills, with useful advice and suggestions to offer. The writer concluded that if there were greater willingness to accept the advice and suggestions that working people have to offer, we could increase productivity by about 30 per cent. and there would be a transformation of industry, with a growth effect, along with the dynamism and momentum that we have been searching for for decades.
I think that this could be achieved easily and quickly if there were a genuine determination among those responsible for decision-taking to seek the advice and support which is clearly available from the working people. We are buried in paper in this House, much of its useless, and it would be a useful job for an hon. Member to distribute a copy of the article to each other Member and three copies to each member of the Cabinet.
Again I thank my hon. Friend the Member for Walsall, South for this debate. It is a pity that the motion has not won more support in terms of attendance on either side of the House. There are difficulties for many hon. Members in attending on Friday, but this motion represents an important problem for the country. We share all the problems of our competitors but we have certain historical and traditional problems which they do not share. They do not have the burdens of management that we have; they do not have the burdens of the advice and influence of the civil servants, which my hon. Friend the Member for Norwich, South so accurately highlighted; they do not have many of the other problems we are trying to cast off.
I believe that the debate has indicated the way in which many of us would like to see the NEB operate. I believe that the advice we have offered has been good, and we would like to see the Department of Industry, in its relations with the Board, take heart and take hold of many of our suggestions.
We wish the Board well. We wish it to expand as we suggest. We wish to see it invest more in the places that we have suggested, not least in those areas which often feel neglected when they see all the activities, assistance and worries being concentrated on the largest companies and largest employers which, in many ways, can look after themselves. They often offer dramatic problems which the Government have to deal with, but the time has come for greater attention to be given to the medium-sized and smaller companies,which still represent an important section of British industry and offer a way out of our problems. That is the area in which the Board should intervene more and for which it should be given more resources.
I hope that from the debate the Board will develop in that way. It is only through the Board, with more Government intervention and financial resources, that we can begin to climb out of the spiral of decline, reduce unemployment from its scandalously high level, and tackle the problems left by successive Governments for far too long.

1.25 p.m.

Mr. John Lee: I apologise that I had to go elsewhere for a time so that I was able to hear only a comparatively small part of the speech by my hon. Friend the Member for Walsall, South (Mr. George). We are all grateful to him, because one of the virtues of these Private Members' days is that the House has an opportunity, in perhaps rather more tranquil circumstances than in the rest of the week, to stock-take and look at problems generalistically. At the moment, so much of our energies and our psychological energy is given to the detailed consideration of constitutional legislation every Tuesday and Wednesday, which I fear will represent the situation for many weeks to come, so these Friday debates have a particular value in this Session.
I, too, read the article in the Sunday Times and found it an illuminating, though not very edifying, experience to see things from the worm's eye view—the words of the title of a play at the Whitehall Theatre about the other ranks in the Army—showing just how bad management can be. It would be a


chastening experience if all Ministers in the Department of Industry and the Department of Energy undertook the kind of experience related in that article. I know that my hon. Friend the Member for Nuneaton (Mr. Huckfield) needs no introduction to such experience because he has done this sort of thing himself. He knows the situation from both angles.

Mr. Atkinson: My hon. Friend had to work for his living, too.

Mr. Lee: Of course, but there were not just the economic aspects—my hon. Friend gained the experience. I am reminded of the first days in the ranks in the Army. One saw the examples of management in its most caricaturable form. If that sort of thing is a significant part of the Establishment, as I believe it is, it is an alarming situation.
Birmingham has a large number of small factories. I could show hon. Members round places which look like something straight out of Dickens. My hon. Friend the Member for Birmingham, Perry Barr (Mr. Rooker), in a final fusillade after his removal as a parliamentary private secretary, had some critical things to say about the lack of implementation of the health and safety at work regulations. I remember a particularly horrifying example of a factory where there was blatant disregard of the old regulations, with all their imperfections. Yet only a nominal fine was imposed. A catalogue of mismanagement and lack of supervision was revealed. All of those who represent Birmingham constituencies know that such instances are not isolated but are significant in number.
We hear constant whining and groaning about labour relations, and it is all at the expense of trade unionists. There are constant insinuations from some newspapers and from some hon. Members opposite—not all, since there are others who are more knowledgeable of these matters—that the whole of British industry's troubles stem from trade union bloody-mindedness. It is not so.
A great deal can be clone for the modernisation of industry, and this is where the National Enterprise Board comes in. For example, it has given a shot in the arm to British Leyland, the

biggest and most important company in the Midlands.
What is Government policy in regard to Government directors on the boards of public companies which are not fully nationalised but where there is Government representation? Such companies range from Appledore Shipbuilders to Chrysler. The oldest is BP where there has been a Government controlling interest since 1914.
I was a little troubled to discover in reply to some probing parliamentary Questions that there seems to be no coherent policy for the Government mandating of directors on the boards of such companies. They are surely not intended to be bowls of flowers on the board room table; they are presumably there to represent the public interest.
Those of us who view the mixed economy with less than unstinted enthusiasm find our arguments for full- blooded nationalisation fortuitously strengthened by the fact that where we have this sort of representation, it is either not used or not used properly.
For example, I understand that in all the years that we have had representation on the board of BP, as well as a controlling interest—and the two do not necessarily go together—no directives have been given to the Government directors about what the Government wanted done. I can understand that where the Government director representation is a minority, as in Chrysler, there could be a bizarre and slightly humiliating situation if the Government directors were outvoted after being given a directive, but at least we should know Government policy on pricing, labour relations, investment, and so on. What is the purpose of these directors, who are often men of high calibre, if they are not emissaries of Government policy?
I hope that the Minister will spell out the Government's general line in regard to these directors. I should be grateful if the Government took more positive action and said that they intendezd to give instructions from time to time so that the directors were not left in doubt that their prime purpose was to represent the Government's interests.

Mr. Madden: My hon. Friend will be interested to know that in reply to a


question by me, senior civil servants giving evidence to the Trade and Industry Sub-Committee of the Public Expenditure Committee said that they did not regard Government directors as "narks". When we took evidence from senior representatives of Chrysler—and my hon. Friend will remember that when Chrysler took over Rootes a Government director was put on the board—they could not even tell me who was the Government director.

Mr. Lee: I am grateful for my hon. Friend's intervention which illustrates dramatically the problem to which I have referred.
Our history books tell us that the Bank of England is nationalised, but I sometimes wonder whether the 1946 Act made any difference. I remember a Chancellor of the Exchequer referring to the Governor of the Bank of England as his "creature" and the right hon. Gentleman had to come here the next day in the most craven fashion to apologise and say that he did not mean anything of the sort. We know from the subsequent behaviour of numerous Governors that that apology represented all too truly the attitude of Governments. I remember saying at a lively election meeting in my constituency that we had not got rid of government by the Thirteenth Earl Home in order to be governed by the Third Earl Cromer.
We look to the Board not as a shot in arm to tide over private industries but as an instrument to extent the scope of effective Government direction of the economy. The dividing line is often not easy to discern, but it is vital. If we fail, we shall not only fail to make a greater advance towards a Socialist economy but shall do the opposite and be using taxpayers' money to prop up an economic system which we are mandated to displace.
I am grateful for the Board's work in the Midlands, for its support for the new Mini and for various assistance it has given to British Leyland and the Midlands motor industry at a difficult time. This industry is vital to our economy, and no one knows that better than the Under-Secretary, who is more knowledgeable on this subject than I.
Many of my constituents work in the motor industry and for the component

manufacturers. Their livelihoods would be very much in jeopardy but for the existence of the Board and the restless probing to ensure that private industry at least conforms to some standards. I realise very well the importance of the Board's rôle.
I referred earlier to firms in my constituency which were positively Dickensian in character. The Under-Secretary knows what I mean. These are firms in the motor trade support industries. Have the Government any intention, by using the Board or by any other method, to take hold of these companies by the scruff of the neck and modernise them? We must ensure that they do not fall down on their job, because we know from the alarming import figures for foreign cars that the long battle to modernise the British motor industry and ward off unnecessary imports is far from being over. It could still be lost, and the consequences for the Midlands would be dire indeed.

1.40 p.m.

Dr. Oonagh McDonald: The National Enterprise Board is part of the Government's industrial strategy. Its main purpose is to operate directly to create employment in areas of high unemployment. At the moment, we know that those areas of high unemployment are to be found in too many parts of the country. We are too apt to think that high unemployment of the kind that we are currently experiencing arises merely from a world recession. But the kind of unemployment that we are experiencing here arises from the much deeper problems of British industry, from the failure to invest over many years, from the failure to keep up with our industrial competitors, from the fact that manufacturing employment is falling in this country faster and deeper than in other Western countries despite their faster growth and productivity, from the fact that we have failed to save enough of our national output for investment and, even more, from the fact that we have failed to ensure that savings get into manufacturing industry in the right places. Even when we invest, we fail to achieve the best results from that investment and innovation for many reasons, including the low output from the workers in industry.
The causes of high unemployment, therefore, are many, complex, various and long-standing, and the function of the NEB is to deal with this problem of unemployment, to ensure that we get the right jobs in the right places and to see that we match those jobs to the skills of existing workers.
In this context, we have to be aware that it is not just that we have high unemployment and that we have it in the traditional areas of high unemployment such as the North-East but that we have new areas of high unemployment emerging. In other words, the problem of unemployment is a changing one. We have such high areas of unemployment emerging in London and in the South-East and certainly in my constituency of Thurrock, unexpectedly, perhaps, and worryingly because this is a new problem which we face. Therefore, the NEB faces a new problem and a new challenge, and the problem and challenge are faced not just by the NEB but also by the Government's industrial strategy. I say "are faced". It would be more correct to say "should be faced" by the Government's industrial strategy.
High unemployment in the South-East is extremely important. Unless we have productive and efficient firms operating in the South-East, we shall not get investment moving from the South-East to other parts of the country, which has been the common pattern of movement of investment for many years now. Unemployment in the South-East and in London is extremely important not just for the people who are unemployed in those areas but also for other parts of the country as well.
The rôle of the NEB was not just to deal with unemployment. It was also to be innovative and creative. Yet, when we look at the way in which the NEB is supposed to function in terms both of the Guidelines which the Government have laid down and of the funds which the Government have made available, it is difficult to see how the NEB can undertake this rôle.
The funds are inadequate. The NEB has been allocated £1,000 million to last until 1979–80. Repeatedly, the Labour Party and the trade union movement have called on the Government to increase the funds available to the NEB and have

suggested a figure of £1 billion annually. They suggest that not in any lighthearted way but because they see the NEB as being an instrument to regenerate British industry. It cannot do that unless we are prepared to put really adequate funds at its disposal.
Looking at the NEB's history since it came into being, we find that inevitably it was taken up with the problems of British Leyland both in terms of funds and also in terms of the time and effort taken to deal with the immense problems faced by British Leyland. I do not quarrel with that. It is right that the NEB should have done it, and I am glad to read of the support for the new Mini and of the corporate plan which has been prepared and which is essential to the success of the company. All this is to be welcomed. It is vital not just for employment in the West Midlands and elsewhere but also for our country's prosperity and to enable us to ward off the flow of imported cars.
But the NEB could and should be more than a repository for lame ducks. It was intended that the NEB should take a stake in successful companies as well and thus promote the right kind of investment in the right places to ensure that the right kinds of jobs were provided where they were most needed. In other words, the rôle of the NEB should be a much more creative and innovative one than it has been so far. It has been too much occupied with rescue efforts. We do not want the NEB to be just an ambulance. It has to be more than that.
When we look at the Guidelines, we find that the NEB should have been playing a part in promoting industrial democracy, yet, from our newspapers in recent weeks, we learn that one of the members of the Board recently dismissed the whole idea of workers' control as a nonsense. How can we accept a commitment to industrial democracy when we appoint to the NEB people who do not believe in the very principles laid down in the Guidelines?
Those of us who have been watching developments closely have seen that the Guidelines have themselves been modified in the last few weeks. The NEB was supposed to provide for the full involvement of employees in decision making


at all levels in the undertakings which it controlled. That is a very important commitment. Over recent weeks, however, it has been modified. The NEB is no longer envisaged as a promoter and pioneer of industrial democracy at all levels.
This action on the part of the Government can only make us suspicious generally about their intentions toward the Bullock Report and the kind of industrial democracy outlined in it. It can only make us suspicious of the kind of innovative and creative rôle that the NEB is supposed to have. It can only make us suspicious that the NEB has no intention of being innovative and creative in this way.
This is important not just because on the Labour Party's side we are committed to the idea of industrial democracy. I put it more strongly than that. Unless we involve workers in decision making at all levels in industry, we shall not make full use of the skills, knowledge and expertise which are to be found amongst workers in industry. We cannot expect to move forward unless we involve the workers in this way right now and in the future, and industry will continue to be as badly and as inefficiently managed as the recent British Institute of Management report set out.
I turn to the basic problem facing the NEB, which is crucial even in carrying out the rôle set out and described in the Acts and in the Government's Guidelines. Let us consider those Guidelines more closely. First, the NEB is excluded from making use of information from the planning agreements. Presumably, we are still making slow, snail-like and painful progress towards the completion of just one planning agreement. But no doubt useful information has emerged in the course of the consultations that are taking place which may one day produce a planning agreement. No doubt useful information has emerged. However, the NEB is excluded from using that information. That brings out the basic inadequacy of the Government's industrial strategy.
Let us think about some of the instruments of that strategy. On the one hand there is the work going on towards planning agreements. There is the work of NEDO and its sectoral reports. There

are development agencies at the Departments of Industry and Employment endeavouring to deal with the problems of high unemployment which we now face. And, of course, the Treasury plays its part in providing or not providing the funds for these purposes.
In other words a range of Government agencies are playing their part in the industrial strategy, but the real lack is that there is no "overview" of the problems faced by manufacturing industry and of the changing nature of those problems. There is nothing to pull the various Government agencies and strategies together into a single coherent strategy in which each of the Government agencies can then play its clearly defined rôle in relation to the others.
For example, there is in these Guidelines and in the subsequent work of the NEB no clarification of the relationship between the NEB and those development agencies. There is no overall strategy, but worse still we have no Government machinery for drawing the various agencies together, and no Government ernment machinery with a sufficiently important place to press for the strategy to be carried out. Until there is something like that, some machinery to meet these problems, we shall make no progress in dealing with the deep underlying difficulties faced by manufacturing industry. We shall find that our economic situation does not improve in spite of the current euphoria about the state of the pound and so on. It is vital that this kind of thinking should be worked out by Government so that we can then see the NEB in a proper perspective, and so that it will be in a position to clarify its own strategy and the rôle which it thinks it should have.
Let us think about what the Board has done so far. It has been engaged in rescue work and it has invested in a range of companies. But now a number of important questions arise about the work. Is the Board becoming too unwieldy? Has it taken on too many disparate firms? Maybe the NEB is operating within some kind of framework, but what is that framework? We do not know and we need to be told so that we can discuss it, whether it exists.
It has recently become clear that the NEB is considering taking a part in the


restructuring of certain key industrial sectors. Is this restructuring to take place in areas where the NEB already has a stake? We do not know. Will the NEB alone play a part in such inevitable restructuring, or will it work with other Government agencies, and, if so, which agencies? How will they fit together and into the overall plan? Will adequate funds be available for the NEB to carry out the restructuring? These are the kind of issues which should be dealt with in the annual report, for which we are still waiting. We have had an interim report from the Board.
How does the NEB see its own rôle in relation to that of other Government agencies? We should have a full report on these issues, and the report should then be discussed by Parliament so that we can play our part in modifying the way in which the NEB sees its rôle, or modify that role when it seems necessary, and so that we may know what the NEB thinks it is up to.

1.55 p.m.

Mr. Norman Lamont: This has been a useful debate and I join the other hon. Members who have thanked the hon. Member for Walsall, South (Mr. George) for initiating it.
Perhaps it was surprising that we did not have a debate on the Guidelines before Christmas. They are extremely important and we might have expected such a debate. But that is one of the points to which I shall return—the whole relationship between the NEB and the House of Commons.
I see before me on the Table a copy of the Prime Minister's favourite bedtime reading—"The Right Approach". I was not intending to go over our whole attitude to the NEB yet again because that has been done on a number of occasions before and our view on the functions and rôle of the NEB has not altered.
Like the hon. Member for Thurrock (Dr. McDonald), I wanted to talk about the Guidelines and to make some points about specific aspects of them. That is a little difficulty because they are so vague that they leave behind a totally clouded picture of what sort of animal the NEB is meant to be.
The Board could be anything from a sanitorium for white elephants to a forc- 
ing house for an expansion of public ownership on a scale hitherto unseen. It is difficult to see anything clear in the Guidelines. It is littered with references to paying attention to consumer interests, to paying attention to the counter-inflation strategy, and to consulting the Director of Fair Trading. But the one surprising thing is that there is no mention of the rate of return which the NEB is expected to earn on its investments.
We are told in paragraph 2 that we should look for
appropriate discounted…rates of return on the proposed investment.
In paragraph 13 we are told—and I suspect that this may be an understatement—that
there may not be a normal return for some time.
Paragraph 13 also says that on some investments the Board will seek
an adequate rate of return within a reason able period.
But how much is "adequate" and how long is "a reasonable period"?
Why can we not have a specific rate of return set out? That happens with the nationalised industries. The other day the Government announced a new target rate of return for the Post Office. In the private sector no company could come to the market for funds without putting forward a very specific account of the sort of return it expected to earn as a result of the new injection of capital.
Yet here no indication is given to the subscriber to the NEB—the taxpayer. It all reminds me of the prospectus of the South Sea Bubble which said
Investors are invited to subscribe to an enterprise which will shortly be revealed unto them.
We do not seem to get much more than that from the Guidelines, and yet we are assured that the NEB will be subject to market disciplines, that it must make a return on its investments.
One point that worries me is that it is clear from paragraph 18 of the Guidelines that there will be different targets for different sectors. It is said that for some assets—for example, the holding of Rolls-Royce and British Leyland—there may be a specific return. We are entitled to know more about that.
Although I can see the logic in different returns, because a number of different


obligations of different kinds will be placed on the NEB, the danger is that if we go down that road there will be a wonderful opportunity for the NEB to fudge and blur the issue and to say that it has earned an overall profitable rate of return provided that a number of its activities is disregarded. I suspect that at the end of the day there will be a cocktail of different rates of return, and the idea that the NEB should overall profit will be gently discarded.
Because the Guidelines are so vague, the relationship between the House of Commons and the NEB is important. Whereas the Draft Guidelines provided that the Government "should" not make detailed and frequent inquiries into the NEB, the final Guidelines have toughened up that proposition by saying that the Government "will" avoid frequent detailed inquiries.
There is a genuine dilemma here, because if the NEB is to function commercially and make a profit, we do not want Members of Parliament to inquire too much into its day-to-day affairs.
However, it is not as simple as that. Under Section 3 of the Industry Act, the NEB can be directed by the Government to do something that it does not want to and is against its own better judgment. We are assured that in those circumstances the Board's activities will be scrutinised by the Public Accounts Committee and that the officers of the Department of Industry will be available to be examined by the PAC on those specific activities. So there will be the nonsensical situation whereby some NEB activities will be subject to the PAC and others will not.
Although I do not want the NEB to be subject to day-to-day detailed scrutiny, it is right that my right hon. Friend the Member for Taunton (Mr. du Calm) should express concern about its relationship with the PAC. It would be right for the PAC to be able to make detailed and regular reviews of the Board's activities.
One difficulty about the Guidelines is that the Government are walking a tightrope. Several Labour Members illustrated this point. On the one hand, the Government have to satisfy their supporters that they are honouring the manifesto commitment to promote industrial democracy and, on the other hand, they

have to reassure the CBI and British industry that they are not going too far.
On the face of it, it seems that the former Prime Minister, the right hon. Member for Huyton (Sir H. Wilson), has been extremely successful in retreating from the commitment previously given, because it seems clear from the wording of the Guidelines that no longer will the NEB be furthering the Government's policy on worker participation. Its obligations have been considerably watered down. We also hear little about what will happen to the NEB's own planning agreements. The Government appear to be in retreat from the full-blooded commitment they made at the time of the election.
The Opposition are much less interested in the Socialist Ark of the Covenant than they are in the intention expressed in the Guidelines that the NEB should have no special competitive advantage vis-à-vis other firms in the private sector. Is it said in the Guidelines that in its pricing policies the NEB will not seek to undermine the private sector.
Of course, the NEB cannot operate exactly as a similar private institution would operate. It is a different animal and different conditions apply to it. No private corporation could possibly get away with starting its trading operations without making clear its capital structure. We still do not know the ratio of equity to loan capital—the division between public dividend capital and funds from the National Loans Fund. That makes a great difference to the way in which the NEB operates because it affects the amount of interest with which it is burdened from the word "Go". No private company could have started in such circumstances.
Despite that, we are assured that the Board will operate commercially, that it will have no unfair advantages, that it will lend to companies at rates comparable with those used for triple A companies in the private sector and that its pricing policy will not be designed to distort the market. Will the Minister confirm that this is happening in practice?
I have heard rumours that the NEB has been putting pressure on some companies to direct their purchasing power towards other companies with which the


Board is connected. That is what we were assured would not happen. The NEB is not just a commercial holding company; it is a vast Government supported body once its influence goes right through the private sector.
The second question I should like to ask connected with the issue whether the NEB operates on normal commercial lines concerns the NEB's stake of over £1 million in White, Child and Beny. I do not know the terms of the stake, but I have seen a report in the Financial Times that the stake had been made on terms less than those that the market would contemplate.

Mr. Atkinson: Does not the hon. Gentleman agree that it would be ludicrous if the electricity supply industry went elsewhere than to Ferranti for a supply of transformers? Would it not be ludicrous if British Airways in certain circumstances were to go elsewhere than to the British aircraft industry? Surely that is what planning is about. If we are to have an intelligent reallocation of resources, we must bring together the supplier and the consumer. It is the matching and planning of that operation that is important.

Mr. Lamont: With respect, the hon. Gentleman seems to be planning for the misallocation of resources. The principles he puts forward are fortunately not followed by the public sector in general, which follows the wise principle of placing orders where it can get the best value for money. I hope that that practice will continue and that the NEB will not operate as a closed mercantilist economy trading only at preferential transfer prices with firms with which it is connected. That would be very much at odds with what is laid down in the Guidelines, and with what the Government said that the NEB would do when it was first set up.
There are several reasons for questioning certain investments that have been made by the NEB. I was a little surprised by the confidence with which the hon. Member for Norwich, South (Mr. Garrett) spoke of some recent developments. I do not make any pretence of being able to make a commercial judgment on these matters. That is quite properly a job for business men, not for

politicians. However, one notices the criticisms that have been made. The hon. Member for Norwich, South referred to the Sinclair Radionics project and how it had not been able to raise finance from the market, but the NEB's support for that firm has been criticised by a number of people and periodicals in the electronics industry; and the point has been made that the pocket television set was not a complete new breakthrough. It was a project that Matsushita failed to be able to market six years ago.
I wonder also whether the NEB's entrée into the scientific instruments field will be any more successful than the entrée of the IRC. I was rather surprised that the hon. Member for Walsall, South was so confident that the rates of return on IRC investment were a subject for praise. I thought that the intervention of the IRC in the scientific instruments field had been extremely unsatisfactory and that no worthwhile return had been earned by the sort of restructuring that had taken place there.
We also feel that in many ways the NEB is likely to be subjected to political pressure.

Mr. John Garrett: Will the hon. Gentleman tell us what a Conservative Government's policy would be when faced with the situation exemplified by Sinclair Radionics, by Reed and Smith and by Munro, a Scottish knitwear company, which are successful companies with fairly good prospects of growth, particularly in import substitution—producing here what we presently import—and which cannot raise sufficient capital through the normal private enterprise channels? What would a Conservative Government do about it?

Mr. Lamont: Who is to say that those companies cannot raise finance through the market and that they are as successful as the hon. Gentleman is so confident that they are? If there is a long-term project which it is thought would be of great scientific and economic benefit to the economy, we have the NRDC which is quite able to put money into projects. We believe that money should be put into projects on an essentially commercial basis. That is the criticism that we would make of what apparently the NEB has been doing.
My hon. Friend the Member for Chichester (Mr. Nelson) referred to the financing of stockpiling which the NEB has been encouraging. Again, one wonders whether in the long term there can be any real prospect of making a return on such an investment. One cannot go on for ever just manufacturing machine tools to produce machine tools to produce machine tools. We remain deeply sceptical and suspicious of the whole concept of the NEB.

Mr. Madden: Before the hon. Member for Henley (Mr. Heseltine), who used to grace the industrial scene for the Opposition, was promoted sideways, he gave every impression of being wholly opposed to the 1975 Act and the NEB. Will the present Opposition spokesman make abundantly clear what, in the unlikely event of a Conservative Government being elected in the foreseeable future, a Conservative Government's attitude would be to the 1975 Act and the NEB? Would the NEB be disbanded and would the Act be repealed, or not?

Mr. Lamont: Our attitude has not changed at all from that expressed in the speeches made by my hon. Friend the Member for Henley (Mr. Heseltine), so the hon. Gentleman can rest assured. If he wishes to hear further on the matter, he may care to note that the Under-Secretary has our mid-term policy document open at exactly the right pages.

Mr. Atkinson: The hon. Member should tell us.

Mr. Lamont: We have made clear that we would get rid of the NEB, and in that way the policy has not changed one iota or scintilla.
As I was saying, we are deeply sceptical of the whole concept of this type of intervention.

Mr. Atkinson: Will the hon. Gentleman give way?

Mr. Lamont: I shall give way to the hon. Gentleman later. I have given way quite a lot. I want to develop my arguments in my own way.

Mr. Atkinson: It is on this particular point, and it is most important.

Mr. Lamont: I shall not give way now.

Mr. Atkinson: Mr. Atkinson rose—

Mr. Speaker: Order. It is quite clear that the hon. Member for Kingston-upon-Thames (Mr. Lamont) is not giving way.

Mr. Lamont: Mr. Lamont rose—

Mr. Atkinson: Come on.

Mr. Lamont: I am answering the question. If the hon. Gentleman will address his mind to it and if I am allowed to get a word out, I am prepared to give him exactly the reason why we remain opposed to intervention of this kind.
The hon. Member for Walsall, South referred to the IRI and said that the NEB was modelled on that body. I should have thought that the IRI in Italy has brought little success to the Italian economy. It has turned out to be a major drain on public expenditure and a major contributor to the financial crisis in Italy, indeed, the whole public sector in the Italian economy has turned out to be free from control and responsible to no one except itself.
We also remain sceptical of the argument that the hon. Member for Tottenham (Mr. Atkinson) advanced when he talked about using bodies such as the NEB as a forcing house for management, an agency for supplying better managers. Why on earth does the hon. Gentleman think that somehow Government-appointed bodies will be able to find able managers who somehow the private sector and the market have missed?
We also think that the management problems in an organisation such as the NEB—an organisation with only 50 people at present—are likely to be very considerable indeed. How can an organisation of 50 people have responsibilities for so many different sectors—for the aerospace sector, for reconstructing the British motor industry, for miniature television sets, for scientific instruments, for containers, and for tendering for contracts in Dubai and Venezuela at the same time? Lord Ryder is a very gifted industrialist and he has many gifted people with him in the NEB. But I do not believe that any group of people are so clever or astute in a business sense that they can reconstruct and manage at one time all those different sectors with long-seated and difficult problems.
If that is not enough, the NEB is charged not merely with reversing the decline in many different sectors of British industry; it is also charged with the responsibility of ushering in a social revolution, bringing in workers' control and dealing with unemployment in the regions. It has been given a hopelessly large industrial task, coupled with a function which, if it means anything, is a political one which is largely beyond the skills and capabilities of a small institution, and well beyond the capabilities, I should have thought, of a whole Government. Therefore, we remain deeply sceptical about the NEB.

Mr. Atkinson: I am grateful to the hon. Gentleman for having given way. This is a very important point and we must get it right. When the hon. Member for Henley (Mr. Heseltine) was given another shadow job, many of us on the Government side of the House understood that that was to facilitate a shift in the Opposition's attitude towards industry. That was the assumption that we made. What the hon. Gentleman has now done is to reiterate a "pre-Henley" statement. He has said that the Conservative Party now stands four square with the statement that it made at that time about the abolition of the NEB.
The hon. Gentleman must now make matters clear to some 220,000 workers whose jobs are in jeopardy from what he has said. There is an outside chance that later this year a General Election will be held, a Conservative Government will be returned, and as one of their first and primary acts they will abolish the whole structure of the NEB. Some 220,000 jobs are in jeopardy. The hon. Gentleman has talked about the restructuring of the Leyland Company. He has now just slung this matter into the pot. It would be a fight for survival for the companies concerned in these circumstances. He must be fair and say to the workers and shop stewards who are now Negotiating planning agreements that they can expect some continuity from the Conservative Party if there were a Conservative Government later this year.

Mr. Lamont: I am astonished that the hon. Gentleman thought that the advent of my hon. Friend the Member for Oswestry (Mr. Biffen) to responsibility for

industry in the Shadow Cabinet had been a manoeuvre in order to adopt a softer line of approach. I had not heard that interpretation before, and I cannot imagine that anyone outside this Chamber has ever suggested it before. Our policy towards the NEB—and I cannot state it any more clearly or at greater length—remains unaltered from that stated by my right hon. Friend the Member for Henley and outlined in "the Right Approach".
If the hon. Gentleman will let me develop my argument, I shall deal now with the question of employment and address myself specifically to some of the points that he raised in his own speech. Some of the justifications that have been put forward for the NEB in the past have been couched in terms of an agency which facilitates industrial change, while other arguments have been in terms of an agency which actually prevents industrial change—although the Secretary of State for Energy, when he made his great speeches in favour of the NEB, cleverly managed to put forward both arguments simultaneously.
In the 30 or 40 years of argument about Government intervention, there has not been any satisfactory answer to the question why Governments think that they or their agencies can second-guess the market. Why do they think that they can see opportunities that business men in the market cannot see? Why do they think that they can spot able managers who are not available already to the private sector?
Our great fear is that bodies such as the NEB will be subjected to political pressure. Lord Ryder has indicated that he intends to be independent, that he intends not to be subjected to pressure from Whitehall. But he will learn. He will find the NEB subjected to political pressure. He might have taken cognisance of the warning given by Lord Beeching about Government intervention, when he said that Governments wish to be deceived—"They wish to see a project carried out for various non-commercial reasons, and they want someone to carry the responsibility for persuading them that it will be profitable". That is what will happen ultimately with the NEB. It is impossible that this organisation can run as a commercial concern earning a positive return on its money when it has been


burdened with the social objectives put in the guidelines.

Dr. McDonald: If that is really what the hon. Gentleman thinks about Government intervention in industry, will he explain the action of the last Conservative Government in taking over Rolls-Royce? How is that justified in terms of Conservative policy?

Mr. Lamont: In the case of Rolls-Royce, there were reasons in terms of the penalties in the contract which made it inevitable that that company was taken into the public sector. It is not something that I particularly welcomed, but it was unavoidable in terms of the legal burden imposed by the contract.
Ultimately, the NEB must end up as a hospital for lame ducks. It will end up making handouts to unsuccessful capitalists.
Above all, it will create a climate of opinion in industry so that what will matter will be not so much the discipline of competition but whom one knows in Whitehall and one's access to officials, and whether one knows someone who can arrange a grant. More and more, this policy will lead to the further politicisation of British industry.
The whole fallacy of the concept of the NEB is that there is somehow an entity called the United Kingdom in which the Government decide which industries they want to grow and which industries should decline. But it is not Governments who decide which industries should expand; it is customers who do that.
It is no more open to Governments to decide which industries should expand and which decline than it is open to Governments to decide what the mix between manufacturing industries and service industries should be. This was a point on which the hon. Member for Tottenham dwelt at some length when he talked about the deindustrialisation of this country. That has always been a very emotive and powerful half-truth, and is one which the Secretary of State for Energy has helped to foster. But it is perfectly normal in an advanced economy for the service sector to grow at the expense of manufacturing industry.
The Secretary of State for Energy has also talked in the past about the growth of manufactured imports compared with the lack of growth of manufactured exports, but even here the concern can be overstated. It is natural in an advanced economy that the services element should grow. The services element in our balance of payments remained healthily in surplus, even in the period when we were in massive deficit on our visible exports. Today, exports of services, together with interest, profits and dividends account for well over 50 per cent. of our visible exports.
I concede that in recent years, in the period after 1973, there has been a sudden and accelerated decline in manufacturing industry, but this has been due, more than anything else, to the sudden and dramatic collapse in the rate of return on capital. The Secretary of State for Energy used to make speeches advocating that each year there ought to be an injection into British industry of £3 billion for investment. It is no coincidence that that is almost exactly the figure that could be given back to the private sector simply by abolishing price controls and giving it the wherewithal to invest in projects which it sees as profitable.
Various Labour Members have posed the question: If we do not have the NEB, what will happen to the jobs in particular industries? If we do not have an agency which can rescue firms, what will happen to the jobs in those firms which have had to be bailed out? It is extraordinarily shortsighted of hon. Members to say, and believe, that over a period of time the private sector cannot by itself provide new jobs in new firms. Between 1959 and 1963 many jobs were lost—or "destroyed", as Labour Members would say. There were 400,000 jobs lost in mining, 325,000 lost in agriculture, 230,000 lost in textiles and 200,000 lost on the railways. Yet in the same period total employment increased by 1·4 million jobs.
It is sheer illusion for hon. Members to think that the only way to create jobs is through a Government agency or through Government intervention. Let them look at the statistics published by the Department of Employment showing future trends for jobs. The Department expects that the trend in the reduction of employment in manufacturing industry


will continue, but it sees an overall increase in employment, via the service sector. There is no reason why the service sector in an efficient modern economy should not be an increasing proportion of that economy.
We are in no way out of line with other industrial countries in that respect. It has been shown over and over again that when old industries have been subjected to the disciplines of the market, new jobs, technologies and industries have appeared, and they will appear provided that private industry has the right to earn a profit, charge a proper price for its products and is not subjected to the whims of Government intervention.
All that is required is to remove the restrictions on private industry and, above all, to restore the level of profitability. That is the way that security of employment will be achieved in this country. We do not need the NEB to do it.

2.31 p.m.

The Under-Secretary of State for Industry (Mr. Les Huckfield): Any hopes that my hon. Friends might have had that even at this late stage they might learn something about what the Opposition would do if they returned to office have been totally dashed by the speech of the hon. Member for Kingston upon Thames (Mr. Lamont). Now that he is settling into his job along with his hon. Friend, I had hoped that they might have worked out a policy. Both have a variety of industrial contacts and experience, and I had hoped that they would take us further than they did. If the document that I am holding is supposed to be a mid-term policy, I am sure that my hon. Friends are horrified and terrified.
The House is grateful to my hon. Friend the Member for Walsall, South (Mr. George) for raising this matter. It has been a wide-ranging debate. We have journey into the working-class situation that Martin Leighton spoke of in The Sunday Times last week. We have dealt with unemployment in Thurrock and other places and a variety of experiences have been explained.
I wish that the hon. Member for Surrey, North-West (Mr. Grylls) could have been here to share our debate, because over the past year he has tabled nearly 80 Questions about the National

Enterprise Board. In the last two weeks, he has put down a further 21 Questions. Just before Christmas he pushed off a hand-written letter to my right hon. Friend the Prime Minister saying that we must have a debate on NEB Guidelines. In The Times of today, he describes what he thinks of the Board. I was left gasping at some of the inaccuracies and misunderstandings about the Board that he perpetrates. This is a first-class opportunity for a whole day's debate on the NEB—that body which so much concerns the Tory Party and the hon. Member for Surrey, North-West. But what do we find? Only two Opposition Members in the Chamber. So much for the concern of the Opposition for British industry, for the reconstructing of British industry and the important guidelines which my hon. Friend has chosen to debate. The document that I hold frightens me. It certainly frightens my constituents, and my God, it frightens many people working in industry.
My hon. Friend the Member for Walsall, South said that he did not want to labour in the vineyards. I hope that I can lift his eyes to the hills because it is from there that the NEB will help. My hon. Friend referred to a paper produced by Maxwell Stamp Associates. I find that it contains a pessimistic assessment of the NEB's potential rôle. He referred to changes in the composition and powers of the Board since it was first conceived in various Labour Party documents. But the basic framework has not changed since the White Paper, "The Regeneration of British Industry"
I take that White Paper as my starting point. Paragraph 3 on page 1 states:
In 1971, investment for each worker in British manufacturing industry was less than half that in France, Japan or the United States, and well below that in Germany or Italy. In spite of the measures to encourage investment taken since then, it has still lagged behind; indeed, it was significantly less in 1972 and in 1973 than it was in 1970.
That is what this debate should have been about today, and that is why I suggest that the House would have appreciated learning from the Opposition what they intend to do.
We do have some basic industrial problems, and my Department and the Government considers that the NEB is central and crucial to carrying out many of the policies and reforms that are required.


We believe that the future of the country and future living standards depend upon a successful, wealth-creating, productive manufacturing industry which relies upon an efficient public sector and, indeed, an efficient private sector. In both those sectors the NEB has an important contribution to make.
The White Paper also states that
Industry and the Government should be partners in the pursuit of the objectives which spell success for industry and prosperity for this country. This requires a closer, clearer and more positive relationship between Government and industry and the construction of that better relationship requires the development of new institutions".
That is the policy which the Government have tried to follow, and the NEB is certainly one of those new institutions.
We need new institutions. That can be shown by the investment record of British industry and the lack of financial investment in manufacturing industry here. Funds that could be used to modernise British industry have been used elsewhere. In the last 10 years, the rate of direct investment by British firms overseas has more than trebled. I should have liked to hear something about that from the Opposition today. Parties of both complexions in Government have tried both macro-economic and micro-economic policies. With the closer relationship between Government, trade unions and industry as featured in the tripartite approach, there is a better chance of developing future policies and an in creased investment in manufacturing industry.
My hon. Friends have been concerned about economic direction and policy formation. I hope to show them that many of the thoughts expressed have been taken on board by my Department and are certainly borne in mind in the tripartite approach to the industrial strategy.
The purpose of the NEB is to promote the efficiency and international competitiveness of British industry and to provide and maintain productive employment in that industry. To further those purposes, the NEB was given wide-ranging functions, to develop and reorganise industrial undertakings; to promote public ownership; to promote industrial democracy in the undertakings which it controls; and to act as the steward of many of the major shareholdings previously held in the Goverment's hands.
We have had certain comments today about the Guidelines and the ability of the House to debate them. Those Guidelines have already been the subject of a great deal of consultation between the CBI, the TUC and other organisations. Nevertheless, hon. Members have raised points about parliamentary accountability and how the House should assess the relevance of the Guidelines and their functioning. In the last resort, it is for the House to decide how it will deal with the NEB and render it accountable. In the debate on 9th December on the report of the Public Accounts Committee, I took particular note of what the right hon. Member for Taunton (Mr. du Cann) said when he complimented my right hon. Friend the Secretary of State on the co-operative attitude displayed by my Department. But if the House is not satisfied with the way in which these matters can be debated, and particularly the way in which its Committees can render the Board accountable, that is a matter for the House.

Mr. Atkinson: We must dismantle the Treasury first.

Mr. Madden: Why should the NEB be responsible to the Public Accounts Committee as opposed to the Select Committee on Nationalised Industries or the Expenditure Committee? Why was the parliamentary link seen to be the Public Accounts Committee?

Mr. Huckfield: There have been certain discussions involving the Chairmen of those Committees, and I understand that that is the allocation of responsibility or accountability so far arrived at. If my hon. Friend wishes to take that matter further, I am sure that, as a member of one of those Committees, he knows better than I do the channels by which to do it.
The trouble is that when Conservative Members want to talk about accountability they cannot decide whether they want the NEB to behave as a free-ranging commercial operation or whether they want to shackle it from the start. That dilemma was illustrated by the hon. Member for Chichester (Mr. Nelson), whose speech I found to be rather a nit-picking performance. It was no more enlightening about future Opposition policies. The hon. Gentleman revealed that while he wanted the Board to be


free of what he called the restriction of centralisation, while he wanted it to behave commercially, he also wanted to know all about what was going on. He wanted to know all about the performance of certain companies, and wanted everything to be monitored.
The Opposition will have to decide whether they want the Board to be a commercial operation or a shackled and hamstrung organisation. Once more, I suspect that the truth will come out only in the final version of the document I am holding, which I think is meant to be a mid-term policy.

Mr. Atkinson: What is the document?

Mr. Huckfield: I would have hoped that by now my hon. Friend was very familiar with "The Right Approach", which I understand to be the policy on which the Conservatives could fight the next election, although of course they are at liberty to change their minds once again.
The hon. Member for Chichester also made one or two points about accountability of the machine tool scheme. I am sure that he realises, as a result of his former and present business connections, that many of the matters of accountability in that scheme are covered by commercial confidentiality, as they should be. The hon. Gentleman would not want detailed financial accounts of companies which have been involved in the scheme bandied about in the House. That is why more information about the scheme has not been made available.
I should like to think that in deciding the tightness of the rein on the Board and its accountability we have arrived at the right formula. As regards its accountability, the formula will have to be finally decided by the House. but it would help the House and the country if the Conservatives made up their mind about their basic attitude to the Board.
I come now to specific details of the Guidelines. My right hon. Friend has directed the NEB to conform to the City Code on Take-overs and Mergers. The Board is not a company and is not subject to the provisions of the Companies Acts, but all the companies with which it is concerned, whether as subsidiaries or associates, are subject to the whole

body of company law in precisely the same way as any other companies are.
Here I want to refer to the point made by my hon. Friend the Member for Birmingham, Handsworth (Mr. Lee), who is very keen on this matter. He talked about the particular responsibilities of Government directors on boards. It is an interesting question, which he has put in the past. There are fundamental principles in the Companies Acts which govern directors' conduct. It would be dogmatic and not very sensible to lay down a basic code to apply to all circumstances. Institutions and circumstances differ. I believe that my hon. Friend will also wish to see the effect of the Government's industrial democracy provisions. The matter of Government directors cannot be considered in isolation.

Mr. Lee: I think that we agree that we cannot get this right until there has been a fundamental change in company law, and we look forward to that. But within the obvious statutory confines of company law it must surely be possible for the Government to give guidance or directives—at any rate, an element of mandate—to the directors whom they appoint so that they may, qua directors, promote Government policy more effectively in the companies in which they are concerned.

Mr. Huckfield: I should not like my hon. Friend to think that there is no contact between the Government and their appointed directors; there is. I shall bear in mind what my hon. Friend says. He has touched on the way in which the NEB renders accountable to itself the companies within its holding or its purview. There are many similarities between the NEB and a private holding company, but there is a difference. I suppose that a private holding company would put its own directors on some of the subsidiary boards. That is not primarily the way in which the NEB has chosen to render its subsidiaries accountable. Instead, it has chosen to do it by close scrutiny of their corporate plans, and I think that so far this method is working well.
Many of us on the Labour Benches feel that if we are to talk of acquisitions and disposals the Board should be able to go a bit further than having merely the


agreement of directors when it moves into companies. In many cases there are wider matters that should be taken into account. If the NEB could buy shares in a company only with the agreement of directors, that would place it at a major disadvantage compared with other businesses. There have been quite a few contested takeovers in the private sector recently and I should not like to find the NEB restricted in the way in which some Conservative Members have suggested today.
I believe that the Guidelines lay down about the right framework of accountability. I do not want to go into all the specifics about the precise occasions upon which the NEB has to go to my right hon. Friend, or the precise occasions when it informs my right hon. Friend. Basically, we feel that the amount of contact that my Department has with the NEB—it is a regular contact—is at about the right level and that there is about the right tightness of rein.
As Members on both sides of the Chamber will know, we have introduced the principle of specific direction as a definite concept. It is in that respect that my right hon. Friend has a direct contact with the NEB. We have made provision for the NEB to conform to the various principles of fair trading legislation now on the statute book. We have also dealt with disposals, in respect of which the Guidelines lay down a formula. Before going into disposals the Guidelines require that the NEB should secure the approval of my right hon. Friend.
The philosophy of the Conservative Party emerges when dealing with disposals. It does not mind public money going into a private company when it is making losses, but Heaven forbid that the public should ever get any gain from the company when it starts improving. That was the philosophy adumbrated today. As soon as a company is on the way up, pull out the public money and let the shareholders enjoy the benefit.

Mr. Nelson: Hear, hear.

Mr. Huckfield: I am glad that the hon. Member for Chichester says "Hear, hear". I hope that the country will recognise the significance of what Conservative Members say.

Mr. Nelson: Hear, hear.

Mr. Huckfield: My hon. Friend the Member for Walsall, South and various Conservative Members have referred to a change that has been made in the Guidelines. It is the only change of significance that has been made since the draft first appeared in March. In that draft the NEB was required to draw my right hon. Friend's attention to any loans, guarantees or other financial commitments into which it proposed to enter, no matter what sum was involved, so that he might have the opportunity of considering them in advance.
Having considered the matter further, the Government decided that it was an undesirable constraint on the NEB's freedom of operation, and delegated power was introduced. The situation under the Guidelines is that the NEB may now make loans, provide guarantees or enter into any form of financial commitment within a limit of £10 million provided that new or significant policy issues are not raised. It can take such action with out reference to my right hon. Friend.
I now refer to a matter that has been raised by the hon. Member for Surrey, North-West. The hon. Gentleman is not in the Chamber and I understand that he is in his constituency. He has taken up commitments to creditors of NEB subsidiaries and associated companies. This is a matter that is referred to in the Guidelines. It may be useful to say at this juncture that only one Government guarantee has been made to the creditors of an NEB subsidiary—namely, the specific commitment in respect of Rolls-Royce (1971) that was given in the House in 1973 by the hon. Member for Woking (Mr. Onslow) on behalf of the Conservative Government. There are no other Government guarantees in respect of creditors of NEB companies.
In 1971, however, a formal commitment was given in the House by Sir Frederick Corfield on behalf of the Government. Sir Frederick said that the Government would be prepared to assist International Computers Limited in fulfilling its obligations to financial institutions supporting its leasing operations. International Computers is now an associate company of the NEB, the NEB holding 24·5 per cent. of the equity. These undertakings are unaffected by the transfer to the NEB of the Government's


equity holding in the company. I am speaking of undertakings that were given by a previous Government and accepted by the present Government.
The Guidelines also refer to the commercial interest rates that should be charged. The NEB is required to charge a rate of interest not less than that paid by commercial companies of the highest standing when raising finance. I am satisfied that this ensures that recipients of loans should not be put at an unfair advantage over their competitors.
Perhaps at the real heart of the Guidelines is the rate of return on capital projects. Once more, Conservative Members have been trying to pin us down as well as trying to pin down the NEB. Under the Industry Act, my right hon. Friend is required, jointly with the Treasury, in determining the financial duties of the NEB, to ensure that these duties taken together are such that the NEB will secure an adequate return on capital employed.
Corporate plans must be worked out between the NEB and the companies involved. When the hon. Member for Kingston upon Thames (Mr. Lamont) was talking about rates of return in the public sector, he should have remembered the experience in the public sector when his own party was in Government. He should remember that in 1971 and 1972 everything that a previous Labour Government had tried to do to establish rates of return for nationalized industries was thrown to the four winds by the Conservative Party in the guise of what it called its counter-inflation policy.
When the hon. Gentleman talks about the fixing of rates of return in the public sector he should consider the disastrous record of his own Government, that completely undid all the excellent work of a previous Labour Government in fixing rates of return.

Mr. Norman Lamont: I was not saying that the rate of return was adequate or inadequate; I was merely asking why we should not know what the rate of return is.

Mr. Huckfield: The hon. Gentleman, with his experience, should recognize that the comparison that he seeks to make is not valid. When the NEB started it

did not have any funds. It had a borrowing power to be exercised within a statutory financial limit. In that situation there should not be any predetermined balance between various loans and public dividend capital until it is a situation that can be examined. The comparison that the hon. Gentleman seeks to make between the NEB and private sector companies shows that either he does not understand the differences in operation between the NEB and the private sector or, perhaps more appropriately, that the Conservative Party has not made up its mind.
The question of what constitutes an adequate return on capital employed is one on which in any set of circumstances there could well be a wide range of view. I believe that the Guidelines make it clear that the NEB's holdings are wider than those of commercial interests and that it will be in a position to take a long-term view, where appropriate, of investment opportunities.
In taking investment decisions the NEB is always required to have regard to profitability and that is stated in the Guidelines. The Guidelines also make clear that companies in which the Board has a stake will have a right to other forms of Government assistance and to various other incentives—for example, those provided by the Department of Employment.
We must also consider the NEB's rôle in planning agreements—a subject that is of great interest to many Labour colleagues. The policy of the Government on this matter was set out in our White Paper in August 1974, "The Regeneration of British Industry", on the basis that planning agreements would be voluntary. As a trade unionist and as somebody who has a number of party meetings each week, I am aware that there are strong feelings on this subject. But I emphasise that the policy of the Government outlined in the White Paper was based on the voluntary planning agreements and envisaged those agreements being entered into voluntarily. The policy also envisaged planning agreements being made directly between my Department and the companies concerned.
My hon. Friends have mentioned the fact that the NEB should become involved in discussions on this score. Although I respect what they say, I must ask them


to bear in mind that those discussions are private and confidential between my Department and the companies involved in planning agreements.
My hon. Friend the Member for Norwich, South (Mr. Garrett) made a number of comparisons between the French system and the commission that undertakes these matters in France. He also mentioned the desire for a national planning commission in this country as outlined in Labour's programme for 1976. I recognise the differences about that programme and the feelings of many people in the trade union movement and in the Labour Party. But my Department is undertaking a wide range of discussions about planning agreements and shortly we hope to be in a position to make announcements.
I turn to the subject of the regions, and I have in mind what was said on this important subject by my hon. Friend the Member for Sowerby (Mr. Madden). The NEB has regional offices in Liverpool and Newcastle and has appointed some experienced men in those offices who have responsibilities in the regions. It is obvious that the regional rôle of the NEB will take time to achieve results. We have only to remember the time it took the Industrial Reorganisation Corporation to achieve results. The NEB has been in existence for only a year, and I ask my hon. Friends to give it a little more time to consider its regional rôle. The NEB is still a young organisation, and I hope that in future it will take account of the sentiments expressed by my hon. Friends about possible activity in the regions.
On the subject of industrial democracy, I take particular note of what was said by my hon. Friends the Member for Walsall, South and Thurrock (Dr. McDonald), and I also bear in mind what was said by other hon. Members on that important subject. The change which has taken place since March represents nothing sinister, and I want to assure my hon. Friend's on that score. I read the piece written in The Times Business News by Maurice Corina and, following the way in which that article was set out, I do not blame my hon. Friends for asking questions.
As they now stand, the Guidelines have been cast in wider terms to avoid any implication that the Government's

policy on industrial democracy has been formed in statutory terms before the appearance of the Bullock Report. It would have been remiss of anyone writing guidelines to prejudge that report. That is why the alteration was made. There is nothing sinister in it.
The Guidelines as they stand enable the NEB to carry out valuable experiments in industrial democracy. Those hon. Members representing car manufacturing constituencies in the Midlands know what is happening in the participation scheme, which is operating and is still being discussed in British Leyland and the valuable progress which is being made in that experiment in industrial democracy.
On the broader aspects of the NEB's powers, I accept that this is now a very widespread and far-ranging operation with a turnover of about £3,000 million, employing more than 250,000 people. It is a very big organisation. We feel its presence particularly in the West Midlands. Those of us who represent Coventry, Birmingham, or other West Midlands seats know that without the Board we should not have much of a car industry left. Without it, we should not have much of an aero industry or a machine tool industry left.
When, in "The Right Approach"—I must refer to it again because my constituents are continually on to me about what it means in practice—the Conservatives talk about selling off NEB companies and winding up the Board, I give them notice that constituencies in the West Midlands are not only angry but very concerned about the direct threat to working men's jobs represented by the proposals in that document. One only has to think of the derelict industrial wasteland that we should now have in the West Midlands had it not been for this Government and the NEB. When my constituents and those of my hon. Friend the Member for Walsall, South and in other West Midlands constituencies see those proposals, they shudder at the thought that the West Midlands might once again become such a wasteland.
My hon. Friend the Member for Norwich. South thought that the NEB would not be able to move a muscle without reference to the Secretary of State. As I have said before today, the NEB's


power to lend and give guarantees without reference to my right hon. Friend has been extended since the original draft was made. I take on board what he said about the Board's freedom to operate. We feel that the right tightness of rein has so far been achieved. That is the basis on which we believe that the Board will operate best.
My hon. Friend was right to refer specifically to the ventures in which the NEB is now involved—companies like Sinclair Radionics. It is a pretty poor commentary on the so-called excellence and potential of the private enterprise system that such a high technology company in a sector of industry which private enterprise should be encouraging is precisely the kind of company which cannot seem to find finance in the institutions which are always being eulogised by hon. Members opposite. That is why I am glad that the Board has become involved. Less well publicised are the operations of other promising companies, like Twinlock, Reed and Smith and Data Recording.
Hon. Members have referred to the involvement of the NEB in overseas ventures. Again, when the hon. Member for Chichester says that he does not want the Board to become involved in such ventures, I wish that he would show as much concern that some of these jumbo contracts should be secured by British firms. It is all very well for him to criticise the involvement by the Board in such contracts—and perhaps some have not turned out in quite the right way—but what worries us is where the initiative from private companies would have come from if the Board had not got involved. I suspect that in many cases there would not have been such initiative. The concept of joint ventures, including overseas, finds favour with the Board.
My hon. Friend the Member for Sowerby referred to a possible joint venture with the local authorities in his constituency. I do not know whether he has been in contact with my Depart-said. But I will have the suggestion examined. I presume that the final decision would be a matter for the Board, but it is an interesting concept. ment about it, or, if so, what has been
My hon. Friend the Member for Walsall, South made an interesting reference to the alleged behaviour, he said, of the Bank of England. As he put it, I thought that he was saying that the Bank of England was in some way in competition with the NEB. I do not know whether that was in fact what he intended to say, but I note his comments and quotations.

Mr. Atkinson: May I revert to the question of joint ventures? My hon. Friend will be aware of the negotiations which took place in Moscow, concluding in the £100 million contract on 9th December. It involved a British consortium which included the NEB, Rolls-Royce, British affiliates of Cooper Industries, and Williams Brothers, an international pipeline company. Does my hon. Friend know that the Board, although responsible for the strategy, which involved the supply of Avon engines by Rolls-Royce as part of the contract, took no interest in the initial discussions and that the consortium was quoting prices double those of West German and American prices for identical equipment?
Does my hon. Friend agree that now is the time for the Board to start to concern itself in such negotiations of an international character in order that some of the firms he has mentioned—such as Ferranti, and others in heavy engineering—should be out in the front line for contracts in South America and elsewhere, which they have failed so far to get because of the extraordinary business of initiating contract discussions at prices which in some cases have been double those of our competitors in West Germany and the United States?

Mr. Huckfield: I am not familiar with all the details of that case, but I will look into the interesting point raised by my hon. Friend. What he said serves to underline the need for flexibility of approach, and what he said about joint ventures raises points which the Board, will, I know, take into account, as I shall. I shall study the valuable points which have been put forward.
We see the Board as a flexible instrument, but not as a lender of last resort. We believe that it could take part in joint ventures and I see no reason why, for example, banks and insurance


companies should not join with the Board in investing large sums in major ventures. I am sure that the possibilities mentioned by my hon. Friends the Members for Norwich, South and Sowerby in connection with small firms should be given further examination.
However, we cannot do all these things overnight. The Board has been operating for barely a year. The IRC, which was set up by a Labour Government in 1966 and abolished by the Conservatives in 1971, did a great deal of good for the British economy, and I believe that the Board can also do a great deal.
My hon. Friend the Member for Walsall, South has performed a useful service in initiating this debate, but though it has given some of my hon. Friends the chance to make some interesting points, and though the whole day has been available for the debate, we have still not heard the alternative proposals of the Opposition. I had hoped that instead of the nitpicking interventions and continuing display of ambiguity about what they would do in difficult industrial situations, we might learn a tiny bit more about their industrial policy. But it was not to be, and we still await that information.
In many ways, the Board is an experimental body; it is certainly flexible, and will play a valuable part in the reconstruction of British industry. The Guidelines which have been laid before the House are the right ones and form the basis upon which the Board should proceed.

3.18 p.m.

Mr. John Cronin: I shall be brief because I know that my hon. Friend the Member for Darlington (Mr. Fletcher) wants to initiate a debate on unemployment.
I feel compelled to speak because many people in my constituency work for Rolls-Royce which is owned by the NEB. The debate is particularly important for my constituents and I am grateful to the Minister for his long and lucid explanation of the Guidelines. I also thank my hon. Friend the Member for Walsall, South (Mr. George) for raising this subject Clearly there should be frequent and careful examinations of the Board's policies and the results they are achieving.
I visited the NEB's offices a little while ago and was courteously and helpfully received by the Chairman, Lord Ryder, and the Deputy Chairman, Mr. Leslie Murphy who explained the functions of the Board and its organisation. I was most impressed by the dedication with which the Board is working to improve British industry. It would be a severe loss if its activities were abolished or even curtailed by a future Conservative Government. I was very pleased, therefore, that when the public expenditure cuts were made in December, the NEB was not made subject to them and in fact received an additional £100 million to further its activities.
The hon. Member for Kingston upon Thames (Mr. Lamont) did very little justice to Lord Ryder when he suggested that he would be the subject of political pressure. Lord Ryder is the last person to allow himself to be influenced in any way likely to be contrary to the national interest. I was surprised that the hon. Member for Kingston upon Thames said that.
The hon. Gentleman talked of the NEB as being a hospital for lame ducks and a refuge for unsuccessful capitalists. He must be completely out of touch with modern thought on the relations between Government and industry. In every modern industrial country there is a national enterprise board or some equivalent of it and, even on the rare occasions that it does not exist, there is some organisation which enables the Government to give direct help to industries which are having difficulties, usually of a temporary nature.

Mr. Michael Marshall: I apologise to the hon. Gentleman and to the House for not being here earlier. Is not the whole difference here that the bodies to which he refers in other countries are doing what the Government said they intended to do—to see the NEB putting money into vigorous, alert and profitable industry? Our worry is that the NEB is putting money into British Leyland and other enterprises which appear to be highly questionable. We have yet to hear the great success stories which have been promised for the NEB.

Mr. Cronin: The important distinction is that at the moment British industry is going through extreme difficulties, and


obviously it is important to help those who need help most and not simply help those who are successful and do not need help.
The Opposition seem completely out of touch with what is an obvious need in all Western countries for close co-operation between the Government and industry and constant help for industries which are in difficulties. I thought that that was recognised everywhere. The Conservative Party is completely behind the times in refuting this philosophy.
The hon. Member for Kingston upon Thames is a very attractive person. But, when he was at the Dispatch Box, his outline became a bit blurred in my vision and I thought that I saw a dinosaur standing there making this type of speech. We ought to have had from the hon. Gentleman a rather more clear-cut view of what the real policies of the Conservative Party were on the subject of the NEB and on the wider subject of helping British industry. He seemed to be a little coy about saying what those policies were.
I can only go back to the public utterances of people like the Leader of the Opposition, the right hon. and learned Member for Surrey, East (Sir G. Howe) and the right hon. Member for Henley (Mr. Heseltine), all of whom have spoken publicly in terms of abolishing the NEB and of selling off the companies of which it has large holdings. If that is not the policy of the Conservative Party, I should be grateful if the hon. Member for Kingston upon Thames would rise immediately to his feet and deny it. His failure to do so makes it apparent that he agrees that this is the formal policy of his party at present.
What will happen if this policy is brought to fruition? If the NEB's 91½ per cent. share of British Leyland is to be sold, who will buy the shares? Presumably they will be sold at a substantial loss, given the present situation in which British Leyland finds itself. Would it not be a reckless waste of public money to sell off companies at a very large loss in the interests of Conservative philosophy? Who will buy Rolls-Royce, and who will buy Alfred Herbert, both of which are 100 per cent. owned by the NEB?
It also occurs to me that, unless the companies which are owned by the NEB receive help with their capital programmes, there will be a steady rundown of their activities. This will mean an enormous loss to exports. It will have a most deleterious effect on our balance of trade. The hon. Member for Kingston upon Thames knows that British Leyland's contribution to our balance of payments is enormous. What will happen if the activities of that company are run down? What will happen to our balance of trade figures? The same argument applies to Rolls-Royce. To what extent will its enormous exports be run down, with a consequent heavy loss to the balance of payments, if Conservative policy of selling off these shares is brought into effect?

Mr. Lamont: The hon. Member seems to be as mystified by me as I am by him. What makes him think that if companies are not bailed out by the Government the resources freed will not be used by the private sector to give rise to other firms? Did the hon. Gentleman hear that section of my speech in which I quoted the loss in just over 10 years of jobs in mining, agriculture, textiles and various other industries, but where, in spite of all these hundreds of thousands of jobs being destroyed, as it is usually put, total employment in that period increased by nearly l·5 million? Those jobs were provided by the private sector with the resources that were freed.

Mr. Cronin: But these resources are provided to much-contracted industries. Does the hon. Member want to see British Leyland and Rolls-Royce contract as the textile and other industries that he mentioned have contracted? It seems economic common sense that if an industry is run down and starved of capital there will be less employment in it. The hon. Member knows in his heart of hearts that if British Leyland and Rolls-Royce did not have substantial injections of Government money they would both be severely run down. Private enterprise will certainly not contribute that capital investment. Why should it invest in a concern which is in serious difficulties when it can put its money into companies which are successful and which will give a much bigger return. The hon. Gentleman's arguments are fallacious.
This country will depend very much for the success of its economic policies on co-operation between the trade unions, Government and industry. The right hon. and hon. Friends of the hon. Member for Kingston upon Thames are at this moment directing siren voices towards the TUC to obtain more of its good will. What does he think will be the TUC's attitude to his party's policy, which is epitomised by his view that the NEB is a hospital for lame ducks? Is he expecting trade unions to co-operate with a party which is committed to allowing large areas of industry to run down purely for party political purposes?
There is no doubt that private industry has completely failed to obtain or invest adequate funds to improve its plant and equipment. This is a serious failure of capitalist organisation. However much one wants to see private enterprise working hand in hand with the Government, whatever its complexion, when industry fails so totally to invest in efficient machinery and plant for the workers in that industry, the stage has been reached at which a large question mark hangs over the future of capitalism in Britain.
I can see no useful purpose in any Government organisation telling an industry exactly how to invest its money because no Government organisation has skilled and detailed knowledge of what that industry should do. There is, however, a case for a large increase in Government investment in industry, that is, increased nationalisation, to provide some form of competition to force inefficient private industries to spend more on re-equipping plant and machinery.
In its one year of existence the NEB has done a remarkably good job. It has given those parts of industry that it has taken over immense help and has completely changed morale and efficiency in those industries. It is the duty of Labour Members to give the NEB every possible encouragement. It say little for the Opposition that they should denigrate such an efficient and dedicated body.

3.30 p.m.

Mr. George: I shall be brief, because we are all waiting to hear my hon. Friend the Member for Luton, West (Mr. Sedge-more) delineate the political philosophy of the Conservative Party. That probably will not take long. I congratulate the

Under-Secretary of State for Employment on his new appointment as Minister for political philosophy, and we all await his reply with eagerness.
This has been a useful debate, but the trouble is that no one says what he thinks. I hope that the Government, the NEB and other authorities will take note of what has been said on the interesting issues that have been raised. I am reassured by the Under-Secretary of State's remark that there will be no watering down of the principle of industrial democracy. I hope that the newspapers will pick up that remark and that it will act as a rejoinder to what was said in the Financial Times.
The hon. Member for Chichester (Mr. Nelson) thought that the NEB should not get involved in profitable concerns. It appeared to him that once a company was profitable the NEB had no business to operate within it and should withdraw. He asked why the Government or the NEB should get involved in profitable companies. The answer is obvious. If the NEB involves itself in profitable concerns the profits it makes can be invested elsewhere. There is, therefore, a rationale for NEB involvement in profitable enterprises.
The public sector of our economy has an unfortunate image. People associate with the public sector inefficiency and lack of profitability. As the NEB continues to function successfully, I hope that the public sector image will change and people will realise that it can involve itself in profitable elements within industry.
There are already sectors within the public sector that are performing efficiently and profitably. I advise hon. Members to read Richard Pryke's book on public enterprise, which paints a much more realistic picture of the public sector than do many previous works on that subject. I hope that the NEB will not become an ambulance station for the unsuccessful elements of capitalism. It is important that the NEB should identify winners and thereby benefit all.
The hon. Member for Kingston upon Thames (Mr. Lamont) seemed to be arguing for a return to Selsdon man. I had hoped that the brief period in the country's history that was dominated by that


segment of Tory Party policy had been forgotten.
Labour Members argued that in a mixed economy the private sector and the public sector should work not in competition but in harmony. However, the hon. Member for Kingston upon Thames seems to be saying that the State should get off the back of the private sector, withdraw from industry and play a very limited rôle. I should have thought that that philosophy was almost flying in the face of experience here and elsewhere.
Almost every other European country—countries which are largely conservative—has rejected that philosophy and seen an enormous rôle for an NEB-type organisation. One could hardly call France a bastion of Socialism, but she has an enormous and an efficient public sector. Italy has been mentioned rather disparagingly. However, one could say that the defects of Italian free enterprise have been almost obliterated by a much more successful public sector. I do not think that necessarily the hon. Gentleman's analysis is correct.

Mr. Madden: During the debate we were told, as was the Under-Secretary, that we had drawn the wrong conclusions from the replacement of the hon. Member for Henley (Mr. Heseltine) by the hon. Member for Oswestry (Mr. Biffen). I wonder what conclusions we ought now to draw from the arrival on the Opposition Front Bench of the hon. Member for Cirencester and Tewkesbury (Mr. Ridley).

Mr. George: I shall not comment on that.
The hon. Member for Arundel (Mr. Marshall) paid us a brief visit today. I appreciate his position in that regard. He seemed to be arguing in his intervention that the Government should not have invested anything in British Leyland because it was a loser and we should not get involved. We were talking about the West Midlands earlier. In the West Midlands there are many so-called losers. Perhaps Alfred Herbert, Chrysler and the Meriden Motor Cycle Co-operative were losers, seen from the perspective of private enterprise. However, I should like briefly to elaborate on what has been said.
If it were not for the Government intervening in British Leyland, Alfred Herbert and so on, industry in the West Midlands would have been obliterated, with catastrophic consequences. I am pleased that the Government intervened with the accelerated project scheme and the ferrous foundry scheme, which affected the West Midlands, and with assistance to Wolverhampton Industrial Engines, Alfred Herbert, Chrysler, and the Meriden Motor Cycle Co-operative. Perhaps those were losers from the Opposition's perspective, but thank God the Government decided that those so-called losers had a potential. The Government did not mount merely a tactical rescue operation, which would have been a negative response to the situation. They put their faith and the faith of the public in general in industries that are capable of being exploited for the benefit of society as a whole.
I hope that the NEB will in some way manage to integrate the public sector and the private sector. Perhaps the days of the old ideologists have gone—on both sides. [Interruption.] Perhaps they have gone, although some Opposition Members remain. In our whole approach to society, seen from one perspective or another, it is clear that the time has gone when those views have any credence. Many European examples have proved that the future of industry in Britain will rest on an efficient public sector but with both the public sector and the private sector working together in harmony.
The NEB can act as a bridge builder between those two sectors. It holds out great prospects for the future of British industry. I hope that carping criticism, fundamental criticism and all sorts of criticism will fade. Let Lord Ryder get on with the job and let us trust that he will be successful. That will be to the advantage of all of us.

3.40 p.m.

Mr. Peter Bottomley: I apologise for not having been in the Chamber for most of the debate, but I am provoked to speak by some remarks made by the hon. Member for Loughborough (Mr. Cronin). The hon. Gentleman asked what the trade unions would say if the NEB did not go on to the great and glorious things that some Labour Members wanted it to do. I merely draw


attention to the results of the public opinion poll published in the Sun on Monday, which showed that at the moment more trade union members support the Conservative Party than support the Labour Party. That is worth repeating again and again. Labour Members should realise that their support does not come from the great mass of working people who feel themselves not to be represented by those who claim to be trade union leaders or political leaders on the Socialist side—or even by myself on the Conservative side.
Second, the hon. Member for Loughborough asked who would buy the bits of industry which the NEB at present owns. I draw attention to the way in which Rolls-Royce Motors was sold off a few years ago. Many people are willing to buy their own stake in British industry when they decide that that is the most appropriate way to invest their money.
Third, when the Government are allowing industry to use its cash balances or private investors to put their own money into Government securities which are yielding well over 12 per cent. and up to 15 per cent., it is odd that these same people who are investing in Government securities, are then taxed more heavily so that the NEB can invest in industry. If the Government could get their spending under control, people would be able to put their own money into industry, and we could have our private industry as efficient and effective as it is in the countries which are providing the money which the IMF is lending to us.
The hon. Member for Walsall, South (Mr. George) did not mention in his examples of countries which have NEB-type operations Germany, Japan and the United States which are, as far as I can remember, the countries which are bailing us out at present.

Question put and agreed to.

Resolved,
That this House takes note of the National Enterprise Board Guidelines which were laid before the House on 22nd and 23rd December 1976.

POLITICAL PARTIES (PHILOSOPHIES)

3.41 p.m.

Mr. Brian Sedgemore: I beg to move,
That this House regrets that under its new leadership, the Conservative Party has become an extremist party; and believes that democracy can only be sustained in Great Britain through the Labour Party and a Labour Government planning for freedom with reason as their inspiration.
I am delighted that the House has given me the opportunity to raise this subject, and I hope to share the time with one hon. Member on the Conservative side. I hope that we can have a mature, quiet and philosophical debate, and I, too, join in congratulating both political parties on having appointed a "Minister for Political Philosophy".
There is, however, a serious aspect to this debate. In my view, neither political parties nor nations can survive unless they have perspectives. I believe that our perspective on this side, that is, the perspective of Socialism, is the perspective of freedom and of reason. Because we believe in freedom and reason, we reject the perspectives which flow from capitalism, which, in fundamental and philosophical terms, can be seen as little more than the transference of the theories of Charles Darwin in the animal world to the economic world. Having in mind, in particular, such people as the hon. Member for Cirencester and Tewkesbury (Mr. Ridley), who, I believe, is a student of the Nobel Prize winner for economics, Mr. Milton Friedman, we see that the perspectives of capitalism are little more than latter-day versions of Herbert Spencer.
Looking back into Socialist history, we see that the strand of freedom lies deep and intense in the soul of Socialism. I take, first, the statement of Aneurin Bevan in "In Place of Fear":
If freedom is to be secured and enlarged, poverty must be ended…There is no other way.
One can go back also to Richard Crossman, who wrote in 1951 in "Planning for Freedom":
The democratic socialist draws his inspiration from the belief that nothing but human will and social conscience can liberate men from a historical process which, if left to itself, leads to slavery, exploitation and war.


One can look back to the poets. Oscar Wilde, for example, said:
Socialism itself will be of value simply because it will lead to individualism. The true perfection of man lies not in what man has but what man is.
One can look back also to the nineteenth-century idealistic philosophers. I should like to quote Marx, but, because of the pain he gives to many, I shall not do so, and nor shall I quote Hegel since it was once said that he was not worth studying even in error. However, I shall quote a more modest English idealistic philosopher, T. H. Green, who said:
We are right in refusing to ascribe the glory of freedom to a state in which the elevation of the few is founded on the degradation of the many.
One can turn to a slightly earlier anarchistic strand in the poet Shelley, another Socialist, who declared in 1812:
A man not only has the right to express his thoughts. It is his duty to do so.
One could go back to the earliest Socialist, Thomas Rainsboro, who said:
The poorest that he in England is hath a right to live as the greatest he.
I hesitate to add my own quotations to that galaxy of talent, but I believe that a Socialist is, as I said in a recent lecture, he who believes that the best life is that in which the creative impulses play the greatest part and the possessive impulses play the smallest part. I believe that
A socialist is one who believes in the positive concept of freedom. He knows that for the generality of man, the release of creative impulses stems neither from the fact nor the challenge of ignorance, poverty and ugliness but from economic security, from craft, from skills, from science, from art, from solitude and thought, from comradeship and joy.
The weapons that we must use are the weapons of common ownership, social control of capital and the sharing of power.
I can think of three people who have moulded the philosophy that exists on the Opposition benches today—Burke, Disraeli and Lord Salisbury. Burke was a corrupt Whig hack. Disraeli was the first British politician to put party before country and Lord Salisbury was a man who did not understand, and indeed hated, the whole concept of democracy in all its forms.
It is curious that the Leader of the Liberal Party should have developed Disraeli's theory about party coming before country. He said that the Leader of the Opposition was putting personal ambition before both party and country. He did not give any evidence to back up that theory, and for that he was wrong. But there was some evidence in the Luton Post and Echo in which the hon. Member for Aberdeen, South (Mr. Sproat) quoted the Leader of the Opposition as saying that she was thrilled with his McCarthyism. The hon. Member for Aberdeen, South did not use the word "McCarthyism" but said that the right hon. Lady was thrilled with what he had been doing recently. I cannot believe that that is so. Anyone whose speeches are written by the CIA quisling, Mr. Robert Moss, has something to answer for in the House.
I do not object to her saying that in some countries which purport to have done something about Socialism terrible things have happened. If she wants to declare war on Russia, that is a matter for her, but let her declare war on behalf of the British people and not on behalf of a foreign intelligence agency.
Looking at the scene in Russia and relating it to the Socialist concept, I should quote the Russian Socialist academic dissident, Roy Medvedev, who in a paper presented to the Institue of Worker Control which commented on Russian Society said:
However, our country has seen virtually no progress in civil and political rights—freedom of speech and the Press, freedom of assembly and of political association, the right to an opposition etc. A gradual democratisation of our society is perfectly feasible, although its implementation remains a difficult task.… In a country like the USSR bureaucratic infelicities are refracted in national republics through the prism of all manner of national pride and pretensions. It has therefore been necessary already in some republics to make a number of concessions particularly in the field of culture.
Whilst one can be critical of the denial of freedom, we should feel deeply for working people in both Socialist and capitalist countries.
The Tory Party is fighting all the battles that we thought we had won for the 20th century. The history is one of the development of public conscience, public concern and even public enterprise. Now we appear to be reverting


to those 19th-century Darwinian evolutionary theories, perhaps best summed up on 21st December by the hon. Member for St. Ives (Mr. Nott) when winding up the economic debate. Referring to a speech by my right hon. Friend the Member for Newham, North-East (Mr. Prentice), he gave a pledge on behalf of the Conservative Party. He said that it was a major necessity to cut pensions and public service pensions. He spelled the matter out in some detail, and I have quoted him several times in my local newspapers. How can a political party start talking about disrupting the concept of the Welfare State, cutting pensions, charging for hospital treatment and perhaps even charging for treatment at school?
It seems to me that the two political parties are coming to a great political divide, and perhaps this gives cause for hope. The last quarter of the 20th centry may well see ideology as an important issue. Ideology is about no more and no less than morality. We shall win in the last quarter of the 20th century because morality is on our side.

3.52 p.m.

Mr. Nicholas Ridley: I am delighted to congratulate the hon. Member for Luton, West (Mr. Sedgemore) on having time to move his motion—and on being made a Parliamentary Private Secretary for the second time. The hon. Gentleman suggested that I had been promoted to Shadow Minister of philosophy. I am afraid that I must tell him that I am acting for the day as Shadow Minister for Sedgemore. The hon. Gentleman is the one to whom our thoughts go out today. He will have to be careful, because he is not allowed to vote against the Government or even to speak against them now. We have seen the awful example of the hon. Members for Leeds, West (Mr. Dean) and Birmingham, Perry Barr (Mr. Rooker), who, it seems, were sacked for doing just that. I congratulate the hon. Gentleman on having kept so much to history in his speech, not straying for a second into the present day.
In his motion the hon. Gentleman talks about moral philosophy and reason as his inspiration. The moral philosophy of the Labour Party does not commend itself to me and my hon. Friends. Let

me speak of the hon. Gentleman's friends from Russia. He has entertained Mr. Ponomarev and Mr. Shelepin, but there was no reception committee for Mr. Solzhenitsyn and Mr. Bukovsky, who seek only to defend human rights and prevent their being trampled upon by a dictatorial régime. Such is the prejudice, the moral philosophy, of the Labour Party that it eschews the reformers and entertains those who would continue a régime under which people are put in prison for their beliefs and under which people do not have human rights.
The hon. Gentleman talks about deprivations of freedom. Has he thought about the deprivations of freedom in Cambodia, Vietnam, Tibet and most of the Black African countries? I am not in favour of what happens in South Africa, but I ask of the Labour Party, with its moral philosophy, "Why is it that the excesses of South Africa are constantly condemned but there is never a word about the excesses of Communist countries, where freedoms far more important and far wider than those extinguished in South Africa have been removed?" The double standards of the Labour Party are nauseous.
The motion talks about democracy. The hon. Gentleman says that it can be sustained only by the Labour Party. Let me remind him of the history of the present Prime Minister, who succeeded in upsetting the recommendations of the Boundaries Commission to make fair constituencies with fair electorates. The right hon. Gentleman then tried to fix the Committee of Selection so that the Government had a majority in Committee when they did not deserve one, and later interfered in the affair of the tied vote on a procedural motion on the Aircraft and Shipbuilding Industries Bill. These are not good auguries for Labour Party democracy.
The House faces the Bill to give devolution status to Scotland and Wales, but it hardly becomes one who advocates democracy that that Bill should be going through without a common move to equalise the representation of those countries at the Parliament of Westminster. As the hon. Gentleman knows, the Scots have 71 seats. If they were to accept the same average electorate as the English, they would have 55 seats. If


they were to accept devolved status appropriate, perhaps, to Ulster, they would have 43 seats.
Why has the Prime Minister not proposed a reduction in the number of seats held by the two countries that he wishes to devolve? The answer is that that would threaten the Labour Party's majority in this place. That is the moral philosophy of the Labour Party. Its philosophy is to win by any dirty means at its disposal, to fix our democratic rules, to rig them, to do anything that it can to try to secure power by cheap and unfortunate methods.
The hon. Gentleman knocked the National Association for Freedom. What is wrong with freedom? What is wrong with a national association to achieve it? The tactics of the Left appear again, namely, the smear, the misinformation.
The suggestion has been made that CIA money is given to the National Association for Freedom. My God, I wish it were. If that were the case, it might be possible for us to take more of the victims of the closed shop to the courts to fight their cases, to take up the unfortunate legal position of many of the victims of trade union bullying and domination, and to fight the cases of those who have been refused tax certificates to work in the building industry as a means of extinguishing self-employment and those who want to follow their living but who have had their freedom to do so removed by the Government.
Those are some of the matters that are important to ordinary people. It is the freedom to work, the freedom of speech and many other basic freedoms that the Conservative Party seeks to promote. We seek to stop the Labour Party extinguishing those freedoms.
It was only the other day that the Prime Minister said that he believed in the freedom of the Press with the qualification—"provided it was accurate". Who is to be judge whether the Press is accurate?

Mr. Peter Bottomley: The Prime Minister.

Mr. Ridley: My hon. Friend is right.
The matters to which I have referred represent the moral philosophy of the

Labour Party—"My party right or wrong. To hell with the freedoms of individuals and the people who form the British electorate." Make no mistake about it; once the democratic rights that the hon. Gentleman seeks to protect in his motion have been extinguished there will be no more elections. It is a surprising thought that none of the countries in the world run by Communist Governments, Marxist Governments, Trotskyite Governments or Maoist Governments has free elections.
If the hon. Gentleman wishes to promote the freedom of the people, let him use his undoubted energies and talents to ensure that there are free elections throughout the Communist world. The free election is the ultimate safeguard of freedom. The hon. Gentleman is in no position to talk about moral philosophy or democracy as long as his voice is not raised with those in the National Association for Freedom in favour of free elections throughout the world.

3.59 p.m.

The Under-Secretary of State for Employment (Mr. John Golding): Certain misconceptions contained in the speech of the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) should be cleared. The Labour Party, which I represent, is a democratic party. It believes strongly in the election of all representatives, and we take exception to remarks about the visit of Mr. Bukovsky. I understand from the categoric statement made by my right hon. Friend the Prime Minister that Mr. Bukovsky was invited to meet Ministers in the Foreign Office and failed—
It being Four o'clock, the debate stood adjourned.

STATUTORY INSTRUMENTS

Mr. Deputy Speaker (Sir Myer Galpern): I propose to take the first five motions together.
Motion made, and Question put forthwith pursuant to Standing Order No. 73A (Standing Committee on Statutory Instruments, &amp;c.).

REPRESENTATION OF THE PEOPLE

That the Representation of the People (Scotland) Amendment Regulations 1976, dated 10th December 1976, a copy of which was


laid before this House on 14th December, be approved.—[Mr. Stallard.]

That the Representation of the People (Amendment) Regulations 1976, dated 30th November 1976, a copy of which was laid before this House on 9th December, be approved.—[Mr. Stallard.]

That the Representation of the People (Northern Ireland) (Amendment) Regulations 1976, dated 2nd December 1976, a copy of which was laid before this House on 9th December, be approved.—[Mr. Stallard.]

That the Elections (Welsh Forms) Regulations 1976, dated 30th November 1976, a copy of which was laid before this House on 9th December, be approved.—[Mr. Stallard.]

COUNTER-INFLATION

Mr. Deputy Speaker (Sir Myer Galpern): That the Counter-Inflation (Price Code) Order 1976 (Amendment) Order 1976 (S.I., 1976, No. 2207), dated 23rd December 1976, a copy of which was laid before this House on 24th December, be approved.—[Mr. Stallard.]

Question agreed to.

VIOLENCE IN THE FAMILY

Ordered,
That Mr. Peter Bottomley be discharged from the Select Committee on Violence in the Family and that Mr. Fergus Montgomery be added to the Committee.—[Mr. Stallard.]

EXPENDITURE

Ordered,
That the Standing Order of 18th November 1974, as amended on 23rd December 1976, relating to the nomination of the Select Committee on Expenditure be amended, by leaving out Mr. Cecil Parkinson and inserting Mr. John Wakeham.—[Mr. Stallard.]

FALKLAND ISLANDS

Motion made, and Question proposed, That this House do now adjourn.—(Mr. Stallard.)

4.1 p.m.

Mr. Richard Luce: I am grateful for this opportunity to raise the subject of the economic future of the Falkland Islands, which is 7,000 miles away in the South Atlantic.
I am glad to see present the Parliamentary Secretary to the Overseas Development Department, who will reply to the debate. In view of the importance of this subject at this time for the Falkland Islanders, I hope that he will convey my

views, which command support among Members on both sides of the House, to the Islanders.
We have reached a critical stage for the Falkland Islanders. Last summer in July 1976, the Shackleton Report conducted an economic survey of the islands and contained a number of important suggestions touching the future of the Islands. My main objective this afternoon is to highlight the recommendations in that report and to express a hope for the near future that the Government will come out with a clear statement on how they intend to respond to the recommendations in that report.
It is necessary at the outset to examine the background to the Falkland Islands. It is a remnant of Britain's overseas responsibilities, as are Hong Kong, Belize and Gibraltar. It cannot be said that there is any clear or single answer to the problems of the Islanders. I suggest that we should examine those problems on their merits in a pragmatic fashion and look primarily at what is in the interests of the Islanders, but fully taking into account where Britain's interests lie.
I had the pleasure of visiting the Islands as a member of a delegation sent by the Commonwealth Parliamentary Asosciation in the autumn of 1971. I shall for ever remember my visit to the islands. It is a beautiful group of islands. Its people are the salt of the earth, and if hon. Members have an opportunity to go there they will readily agree that one of its greatest advantages is that it is far away from some of the worst aspects of industrialised countries. It is free from pollution. It is beautiful, isolated, and its people lead a peaceful country life. The population is just under 2,000, on two fairly substantial islands. They are largely dependent for their survival on wool, and are a short distance—300 or 400 miles—from the mainland in the Argentine.
The United Kingdom has had sovereignty over these Islands for about 150 years. When talking about the economic future of the Islands, it is essential to touch for a moment on the sovereignty question, for a clear understanding of this is and must be a key to the islands' economic future.
Since I have been a Member of this House, successive Ministers in successive


Governments have affirmed that there will be no change in the sovereignty of these Islands without the full consent of the Islanders. I hope that the Minister will repeat that affirmation today. We must remind the Islanders exactly what is the British policy on sovereignty.
However, we must also recognise that the Argentine makes a claim to the Islands and is the main neighbouring country. We must take into account not just the proximity of the Argentine but its size and, in some ways, its importance to the Islanders. In 1971, the Buenos Aires Communications Agreement was signed among Britain, the Falkland Islands and the Argentine, designed to improve economic co-operation and social and cultural co-operation between the Islands and the Argentine.
At the time, I supported that agreement. I thought that it was a sensible and practical move which demonstrated the willingness of our three countries to co-operate. It would be a great help if the Minister would comment on how that agreement is working, particularly in the economic context.
The Islands have only just over 2,000 inhabitants, but because of the size of the main islands, they could support many more. They are largely dependent on the sale of wool, but their output of wool has been static for about 10 years. There is no shadow of doubt that over the years the morale of the Islanders has declined because they have been uncertain about their future. Perhaps because of this emigration has increased—to a rate much higher than emigration from the Scottish Highlands and Islands.
The Islanders depend largely on the United Kingdom and also on the Falkland Islands Company, which has done much to foster the prosperity of the Islands. One can ask, as the Shackleton Report does—I am sure that the company itself would agree—whether it is healthy to have one company with too strong a monopoly position. They have a limited infrastructure. There are virtually no roads. Local investment opportunities are lacking, and many funds are draining out to the United Kingdom. The standard of living is lower than in the United Kingdom. They have 10 per

cent. lower wages in real terms than the average in this country.
However, for the past 100 years, the Islands have been virtually self-supporting and the United Kingdom has benefited financially from our relationship with them. In 1974, we earned about £2¼ million from the sale of special quality Falkland Islands wool. The Shackleton Report highlights the fact that between 1951 and 1973 the revenue from taxes on profits transferred to Great Britain was twice the amount of aid from Britain to the Islands. We took £1·9 million in direct tax taken from dividends and profits transferred here, whereas we gave out £0·9 million in aid. It may be true that, since 1973, the balance has changed a little, but that is the figure highlighted in the Shackleton Report.
What about the economic survey of the Falkland Islands? It should be said that Lord Shackleton and his team have done a great service to the Islands and the United Kingdom. The report is thorough, comprehensive and exciting in its recommendations, and I want to highlight some of the main areas of potential development to which the report referred.
The first is in agriculture. There are only 36 farms on the Islands, each on average amounting to 75,000 acres, so they are very large farms. Of the total, 27, amounting to 95 per cent. of the acreage, are company-owned. It must be emphasised that the Falkland Islands Company, although it owns only eight farms, owns about 46 per cent. of the acreage. The report recommends that it would be healthy for the agricultural future of the Islands if more attention were given to facilitating tenant and owner-managed farms, and perhaps in some cases breaking down the size of the farms and enabling more individuals to have a private stake in running small farms and small holdings.
The report recommends also that it should be possible, given our agricultural expertise, to increase the wool yield per acre by improving the nutritional value of the grass. It estimates that this could achieve a 10 per cent. increased yield, which might produce another £150,000 gross income for the Islands. It also recommends some degree of agricultural diversification.
When we consider the fishery situation, I believe that we in Britain have let the Japanese and the Russians in particular get away with the exploitation of the South Atlantic. There is undoubtedly, as the report highlights, enormous potential in the fishery field around the Islands, and because of our special relationship we would have the advantage of a base from which to operate.
An obvious fact which comes out in the recommendation on fisheries is that the potential for blue whiting is enormous. Blue whiting, which can be used for fishmeal, has substantial scope. The report, on page 11 of volume 2, says:
The yield of blue whiting alone might be equivalent to the current total of the United Kingdom's fish landings.
Again, krill, a shrimplike animal, has enormous protein content. The krill in that area is the largest untapped source of protein in the world. If we were to develop it, a local fishmeal processing plant would have to be established. These are simply two very important areas of fisheries which lie open to exploitation.
I turn now to alginates. The Islands are familiar for what is known as kelp, a giant seaweed, which can be used for stabilisers and binders in foodstuffs, pharmaceuticals, textile and papers. Alginate Industries Ltd., operating from Britain, has some interest in the Islands but has not been able to develop it sufficiently in the recent past because the market is poor and because it has insufficient confidence in the long-term stability of the Islands. But the Shackle-ton Report estimates that in the initial stages the development of this project could yield another £200,000 to the economy.
The Alginate Industries predict a dramatic increase in their turnover provided that they are given adequate assurances on sovereignty and that they can be sure of the British Government's strong economic commitment to the Islands.
Now let me turn to tourism. The Islands are unique for their wild life and natural beauty and the report estimates that there is potential for about 5,000 tourists a year—most of whom would come from the Americas—and that this would yield another 340,000 a year. This sum represents a 14 per cent. increase in the Islands' gross domestic product. There are obstacles, including the

need to develop facilities such as hotels and the problems in obtaining a white card to get through Argentina to the Islands. There are also difficulties associated with the permanent airfield.
The report plays down the importance of oil but is contradictory in places. It is understandable that the subject of oil should be played down because it is politically sensitive, but the report says:
It is likely that a positive response from oil companies would ensue if political barriers to exploration and production in the area were removed and licences offered.
The report rightly suggests that if this is to happen, we must offer co-operation with Argentina. The prospects for oil may be long term, but it is important to bear this in mind and to be willing to co-operate with Argentina and respond to the known interests of the North American oil companies in undertaking further surveys and possibly oil exploration in future.
The report makes recommendations about the need for improved financial services in the Islands, including better overdraft and loan facilities and financial advice. At present, the Islanders get a poor return on their investments.
I turn now to the main difficulties in carrying out the recommendations of the Committee. The first is cost and, at a time when we are under severe economic pressure, any suggestion to increase public expenditure must be considered with the greatest care.
The cost of implementing all the recommendations would be about £13 million. Of that, £5·1 million would be Government investment spread over five years. It is questionable whether some recommendations, such as the £1 million for roads, are needed at least in the immediate future. The recommendations on fishing would cost £8·5 million, but they are for the longer term and I wonder whether some of this money could not be raised through private investment from this country and elsewhere.
A second constraint is the sensitive and important issue of the permanent airfield. I understand that we have just about completed a 1,250 metre strip at a cost of about £4 million, but that it can take only small jets. I do not think that it is open yet and I should be grateful if the Minister could tell


us when it will be in operation and what has been the cost to the British taxpayer so far. There is a danger of the airfield becoming a white elephant. The report recommends strongly that the runway should be extended by 900 metres. That would cost about £3.5 million of taxpayers' money. But the strong feeling expressed in the report is that, unless we have that extension to the runway it will not be possible to facilitate the economic development of the Islands, and I highlight tourism, the fisheries and the export of mutton and fish products. Unless we can get some assurance about that, there will not be a real prospect of developing the Islands.
As I see it, we have three options. First, we can do nothing, in which case the Islanders will potter on, morale will decline still further and the Islands will sink into a slough of despond. Secondly, we can undertake a compromise on the Shackleton Report, which in my view would be counter-productive. Thirdly, which is what I recommend, we can decide to undertake an exciting joint venture between Britain and the Falkland Islands under a new investment plan following the recommendations of the Shackleton Report which would be to the mutual advantage of Britain and of the Islands and at the same time we can seek the active co-operation of the Argentine in doing just this.
I recommend to the Government that they reaffirm the sovereignty and that there shall be no change without the consent of the Islanders. I hope that the Minister will say when the Government intend to respond to the Shackleton Report. I hope that they will announce that there will be a positive investment programme in the Islands and that we shall co-operate economically with the Argentine if that is what they would like us to do.
It is time to be bold about the Islands. The scope is enormous, and the Shackle-ton Report provides a catalyst for this. I express the wish on behalf of both the Islands and Britain that the Government will in the very near future—in a few weeks at the most—come forward with a statement giving a new source of help and encouragement to the Islanders.

4.22 p.m.

The Under-Secretary of State for Foreign and Commonwealth Affairs (Mr. John Tomlinson): I am grateful to the hon. Member for Shoreham (Mr. Luce) for raising the interesting subject of the economic future of the Falkland Islands. My right hon. Friend the Minister of State has asked me to reply.
I know that the hon. Member for Shoreham is among those hon. Members who have visited the Islands in recent years. This gave added weight to what he said. He spoke from personal knowledge of, and obvious sympathy with, the concerns of this community, whose remoteness from the United Kingdom and tiny size are complicating factors in any consideration of their economic development. Another factor in considering their economic future is that, judged by developmental standards. the Islands are relatively prosperous—a fact acknowledged by the hon. Gentleman. As hon. Members will know, our limited aid funds have to be applied where the need is greatest, subject, of course, to the reasonable requirements of any British dependent territory.
Lord Shackleton's wide-ranging and detailed economic survey of the Falkland Islands, to which the hon. Gentleman referred in some detail, is the basis of our present consideration of the economic future of the Islands. The hon. Gentleman set himself a very difficult task in attempting in a 20-minute speech to highlight the recommendations of the report, running as it does to more than 400 closely-argued pages and containing more than 90 separate and distinct recommendations.
The report merits careful study by all concerned about the future of the Falkland Islands. Since the report was published, there have been detailed discussions between a number of Departments of State, with commercial interests, with the Islanders and with both the previous and the present Governor. The Government have not been dragging their feet on this issue.
The hon. Gentleman asked me specifically about a statement. All that I can say is that my right hon. Friend will make a statement at an opportune moment. It is impossible for me to go beyond that at present.
In the eyes of the Islanders, a key recommendation in the report is the extension of the permanent airfield which Her Majesty's Government are now building in the Falkland Islands. Lord Shackleton's view was that this was a crucial factor in any economic development of the Islands. But, as hon. Members will know, these facilities can be very expensive. The cost would run to many millions of pounds. As my hon. Friend the Minister for Overseas Development told the hon. Member for Eccles (Mr. Carter-Jones) on 22nd November, we have run into technical difficulties about the completion date and cost of the present airfield. It would be a misuse of public funds to proceed with Lord Shackleton's proposal for an extension without the most searching technical and economic evaluation of the project.
As I said earlier, the Governor has discussed Lord Shackleton's report with the Islanders. This process of consultation will continue. The new Governor, Mr. Parker, who arrived in the Islands just before Christmas, will be examining further with his councillors the implications of Lord Shackleton's recommendations. He has already assured them, as I now assure the House, that there is no intention whatever of brushing the recommendations under the carpet. There is one important aspect to which we and the Islanders will have to apply our minds —that is the question of recurrent costs. Some of Lord Shackleton's recommendations, if implemented, would be expensive. The Islands are not given budgetary aid and, I know, are anxious to continue to pay their way. This is just one of the problems which we and the Islanders will have to consider together.
As I mentioned earlier, we have consulted with commercial interests. One particularly interesting proposal has come from a firm occupying a leading position in the important activity of the extraction of alginates from seaweed.
Its plans, if brought to fruition, could confer considerable benefits on the Islanders. Initial discussions have also taken place about ways of encouraging a detailed appraisal of the prospects for a deep-water fishing industry. We also keep in regular contact with the Falkland Islands Company.
Although the hon. Member's speech was confined to the economic future of the Islands, certain other topics have been raised. In view of the wide interest quite propertly shown in these remote islands I can quite understand that, but I hope that I shall be forgiven if I deal with only some of them, and briefly.
I note what the hon. Member said about the importance of tourism, about the white card, and about the financial provision. I can give him an assurance that these points are noted and will be taken seriously by the Government. Due weight will be given to what the hon. Member said.
I have dealt with the question of sovereignty. The hon. Member also raised the problem of the communication agreement. I am advised that the agreement with the Argentine is working reasonably well and that the arrangements have benefited the islanders. The hon. Member raised detailed questions about the agricultural problems and the question of diversification. These are all the subject of study and of consultation, and I am sure that he would not expect a detailed reply from me about them.
There is also the problem of fisheries. Lord Shackleton's view, with which I personally concur, was that any development of offshore fishing would be subject to considerable difficulties in default of some agreement with the Argentine. Given the rich potential of the area, which Lord Shackleton emphasised, we intend to discuss the possibility of reaching some agreement with the Islanders and the Argentine. The hon. Member raised the particular problem of krill. The development of this potentially valuable resource must, however, await further scientific assessment. This is another activity which I believe—and, judging from what the hon. Member said, he believes too—should be discussed with the islanders and the Argentine.
The hon. Member referred to the important question of oil and said that this had been underplayed by the Shackleton Report. For practical reasons, there can be no question of issuing licences for oil exploration and development in disputed areas before we can reach an agreement with the Argentine. There would be little prospect of a commercial response to a unilateral British licensing initiative.
We come then to the problems of the airport, which the hon. Gentleman recognised. I have referred to the airfield and I am sure that the hon. Member appreciates not only the difficulties about provision but the steps taken by the Government in full consultation with all concerned.
In conclusion, I should like once more to thank the hon. Member for raising this interesting subject. In spite of the small size of the Islands and their population they produce a number of complex problems,

some of which have been highlighted this afternoon. I have touched upon only some of the broad factors which have a bearing on the economic future of the Islands. But I hope that I will have left no one in doubt of the Government's concern for the future of the Falkland Islanders against the background of the important recommendations by Lord Shackleton in his report.

Question put and agreed to.

Adjourned accordingly at twenty-nine minutes past Four o'clock.